Asia Tankers-VLCC Rates Soar on West Africa, MidEast Liftings

Posted by Joseph Keefe September 30, 2016

VLCC earnings double in a week. End of force majeure in Nigeria buoys cargo volumes.

Freight rates for very large crude carriers (VLCCs) are set to rise further next week, fuelled by a raft of cargoes from West Africa and the Middle East amid tight tonnage supply, ship brokers said on Friday.

VLCC freight rates hit a multi-month high on Thursday.

"The optimism among owners is punchy - I think the market has legs on it and could easily increase by another 10 points (on the Worldscale measure)," a European supertanker broker said on Friday.

That would be a rise of around $10,000 per day in earnings for a VLCC from the Middle East to Asia, freight rate data on the Reuters Eikon terminal showed.

"Rates have come from $10,000 per day and owners have been able to whack it up to $20,000 day. They have doubled earnings in a week - this momentum is not something you can easily curb," the broker said.

The momentum picked up after the number of supertanker cargoes from West Africa climbed by around 25 percent since on Shell lifted force majeure on Bonny light crude exports from Nigeria on September 6, 2016.

"West Africa is the big change with 10 extra cargoes compared with a normal month," a second European supertanker broker said.

The number of cargoes from West Africa is expected to rise next month with eight cargoes of Qua Iboe crude oil from Nigeria, under force majeure since a pipeline issue in July, scheduled to be shipped, according to loading plans shown to Reuters.

Exports of Qua Iboe crude could rise further in November with 285,000 barrels per day (bpd) provisionally forecast, according to an initial loading programme.

"There are still cargoes to be done from West Africa with three or four for October loading. There have been 40 plus cargoes so far from the Middle East in the 10 days to October 20," the second tanker broker said.

There could be a similar number of fixtures for the final 10 days of October.

"October will be a big month. A lot of ships dispersed from the Middle East to West Africa which has thinned out the list of available tonnage," the second broker added.

VLCC rates from the Middle East to Japan climbed to around W38.25 on Thursday from about W32.50 last week, the highest since Aug. 22. That was an increase in earnings from $13,567 to $19,961 a day.

Rates for VLCCs from West Africa to China soared to W50 on Thursday against W43 on the same day last week.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia were almost unchanged at W66.75 on Thursday compared with around W67.50 last week.