Asia Tankers-VLCCs Rates Ease as Tanker Jams Fade

Posted by Joseph Keefe April 29, 2016

Port congestion eases at Basra and Chinese ports; tanker demand set to expand on lower oil prices.

Freight rates for very large crude carriers (VLCCs), hurt by slower-than-usual release of cargo, could slip further next week as more tonnage becomes available with the easing of recent tanker traffic jams in China, ship brokers said on Friday.

Charter rates from the Middle East to Japan slipped to a six-month low on Thursday, falling by 12 Worldscale points or almost $14,000 since April 21.

There are talks of a VLCC from Basra to Asia being fixed for a rate of W45, a Singapore-based supertanker broker said.

This could not be confirmed, but if true, the rate would be the lowest since Sept. 2, according to data on the Thomson Reuters Eikon terminal.

"I don't believe we're at the bottom yet, but we should be close," the broker said. "Rates are under pressure. The delays in China have come off and a lot more ships have come available as a result of that," the broker added.

Delays in loading and unloading oil at Basra in Iraq and ports in China, particularly in Qingdao, led to massive queues of tankers, with vessels waiting up to a month.

Iraq, which typically cuts Basra exports whenever there is a backlog of ships waiting to load at its port, is seen shipping 3.085 million barrels per day (bpd) in May, versus 3.28 million bpd in April, trade sources said.

"Cargo has just been trickling out. A reasonable amount of business is being done but it's not enough to mop up the tonnage. There are plenty of ships to choose from," the Singapore broker said.

Owners are now waiting for charterers to release fixtures next week for loading in the middle of May.

Owners may look "for West African cargoes because of the light Basra program for the remainder of May," Norwegian ship broker said in a note this week.

VLCC rates from the Middle East to Japan fell to about W48 on Thursday, down from around W60.25 the same day last week.

Rates for VLCCs from West Africa to China dropped to about W55.50 on Thursday, against W64.25 last Thursday.

There was more optimism about the tanker market for the rest of the year after European tanker owner Euronav posted its strongest first-quarter results in eight years, with a net profit of $113.5 million on revenue of $214.9 million.

"Demand continues to expand, stimulated by a lower-for-longer oil price," Euronav Chief Executive Paddy Rodgers said in an earnings statement.

Tanker demand has been fuelled by Middle East oil producers unable or unwilling to restrict output, coupled with rising imports to the United States and demand from China's so-called teapot refineries, said Ralph Leszczynski, head of research at ship broker Banchero Costa in Singapore.

The International Energy Agency is forecasting crude oil demand growth of 1.2 million barrels per day for every year until 2020, the Euronav statement said.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell below W99 on Thursday, the lowest since Nov 17, from W110 last week on sluggish demand, brokers said.