Asia Tankers-VLCC Rates Face Pressure

Posted by Joseph Keefe April 22, 2016

Number of MidEast charter fixtures less than usual; Basra crude exports set to fall in May.

Freight rates for very large crude carriers (VLCCs) will come under further pressure next week if the current sluggish chartering activity continues, ship brokers said on Friday.

Charter rates from the Middle East to Japan fell about 9 points on the Worldscale measure this week as an expected raft of fixtures for loading in Basra and Saudi Arabia failed to materialise, brokers said.

That was equivalent to a drop in earnings of $8,800 per day, according to chartering data on the Reuters Eikon terminal.

"The market dipped sharply," said a European supertanker broker on Friday. "What's puzzling everybody - owners, brokers - is why it's so quiet in the market when Saudi Arabia, Iraq and Russia are still pumping oil."

Around 20 fixtures were reported last week for loading in the Middle East in the first 10 days of May, compared with around double that number in a normal month, brokers said.

"May is starting very, very slowly," a second European supertanker broker said. "It's impossible to call" how the market will develop next week, the broker said.

Trade sources expect total crude exports from Basra to fall to 3.085 million barrels per day (bpd) in May, the lowest this year, following loading delays at the south Iraqi terminal.

Although vessel delays at ports in Basra and China have eased, worries about congestion continue to add to market uncertainty, brokers said.

"Activity remains very sluggish and charterers have held back. Owners are still waiting for activity to pick up but rates remain under pressure for now," said Norwegian ship broker Fearnley in a note on Wednesday.

"Anticipation for the Saudi stem confirmations was high but has so far been a non-event," the Fearnley note added.

VLCC rates from the Middle East to Japan fell to about W60.25 on Thursday, down from W68.25 a week earlier.

Supertanker rates from West Africa to China dropped to about W64.25 on Thursday, against about W68.25 last Thursday.

"West African cargo volumes are very sluggish as well," the first European broker said.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to W110 on Thursday, the lowest since Feb. 16, from W118 on the same day last week on weaker demand, brokers said.