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By • Dec 9th, 2011 • Category: Tankers

The Coracle tanker market podcast for Dec 8, 2011 in association with Braemar-Seascope

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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for December 8th. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

We start with the VL’s and there have been some interesting developments in the market as a whole this week. We had confirmation of the early shutting down of the Sunoco Marcus Hook refinery. This is mainly supplied by West African crude on Suezmax vessels so may not directly affect VLCCs, however it is quite likely that at least some of this additional West African crude will be diverted to the East on VLCCs. We also had the EU attempting to further sideline Iran by limiting its oil imports to the area. Sometimes such threats by politicians, when more closely assessed, only confirm the uncomfortable truth that most of southern Europe’s refineries require Iranian crude, to the tune of approximately 215 million barrels last year. To replace this would be difficult and expensive: furthermore the crude contracts would quickly find a home in India or China, never to be seen again. The VLCC market this week has been steady but softer. Owners have managed to keep freight rates roughly where they have been since last week at 270 at 58 for AG/East and 280 at 38 for AG/US Gulf. The market has been busy with 41 reported fixtures over the week, which has been to owners’ advantage, however, they have not been able to increase rates due to the incessant availability of tonnage.

West Africa has again been subdued with the only reports being W.Africa/China fixed 260 at 57.5, which is slightly softer than last week’s rate assessment and in line with W Africa/US Gulf rates. Most of these cargoes have once again been covered on Suezmax tonnage. Two cargoes were fixed by Indian charterers this week. BPCL entered for W Africa/WC India off 6-7 January and managed to fix at $3.45m whilst Reliance fixed an oil company relet on the W Africa/WC India route off end December at $3.3m. The lower rate can be justified on the basis that the cargo was an Angola load only and had no NMA fees (which are approximately $200,000).

The 30 day availability index shows 46 vessels which include 9 vessels which are 15 years old or older and 2 newbuildings, compared to last week’s total of 56. So far, 120 cargoes have been fixed for December. Perhaps we are in for another bumper month of AG VLCC fixing…. With the freight rate for 280 AG/US Gulf at 38, and bunkers at $688/tonne, down 2, owners’ earnings are minus $4,100/day. This compares with 270 AG East at 58 which returns owners $17,500 a day.

Looking at the Suezmaxes and it was a bit of a rollercoaster ride in West Africa this week, following the highs of last week. You could say the writing was on the wall on Thursday of last week, with 87.5 being fixed to UKC-Med. The rates continued on their downward path into this week and each new fixture brought a further drop as the availability of tonnage on the list took its toll. In the early part of this week, rates hit a low of 71 and a quarter for a US Gulf run. This proved to be the bottom and the rates rebounded (albeit slowly) from there. During the middle part of what was expected to be a quiet week, levels of activity ramped up sufficiently for market to turn upwards in earnest. On Wednesday we saw 11 West Africa fixtures, although rates didn’t move much. This completed the majority of the December dates: it is estimated that there are approximately 10 cargoes left for the balance of the month. With the levels of activity seen, the rate rises are maybe a touch disappointing. Next week we should see the completion of December dates, which potentially may lead to a quiet week with charterers fixed so far forward. Once again, West Africa led the way this week and Mediterranean charterers quietly fixed the December Black Sea program. The 4 remaining cargoes from last week were covered at the end of last week/beginning of this week and this led to a relatively quiet start to the week. There was a single Black Sea cargo that was left a little bit late, but the added pressure that comes with early dates only led to the charterers fixing 89. The Turkish straits delays were reduced, but only by a day and this meant a lengthening in the tonnage list.

Considering the Aframax market and we have to note that it is party week in London and New York this week, and one would have thought it would be quieter than normal considering many people are getting into the festive spirit. It was looking like it was heading that way up until mid-week when aframax rates started to move upwards in North West Europe, Baltic and Mediterranean. On the back of the Mediterranean firming significantly and rates being stagnant in recent weeks, an influx of cross-North Sea cargoes hit the market. As many as 6 in one day were in the market and ultimately owners managed to push rates up to 80 at 125. This was a 30 point difference from this time last week, equating to approximately $25,000/day. In the Baltic, charterers have continued to cover Primorsk stems, some of these for forward dates. With the influx, owners have been reluctant to fix away their ships, preferring to hold off and watch what happens. In the Med and Black Sea we have seen the sentiment change from flat and stable to firming and strong. This was first spurred by an increase in Turkish strait delays, which led to replacement and forward fixing. This increased activity and hype in the market. Added to this was a sizeable amount of enquiry which helped stimulate owners’ bullish ideas. As a result, fixing levels have climbed from 80 at 85 to 80 at 145! Another defining factor in helping Mediterranean rates firm was the increased demand from West Africa which drew away some tonnage. At present we anticipate rates will climb further, but as we have seen so often in recent history, will ultimately depend on what happens with Turkish strait delays and whether the level of supply and demand continues.

Turning to the clean markets and the week started poorly for the LR2 market East of Suez, although there were several enquiries for gasoil stems to move west. Charterers are becoming increasingly determined to have a Singapore option and it appears that some ships fixed in the last few weeks may end up only performing shorter voyages than they hoped for. In the meantime there was some good news west of Suez as the naphtha arbitrage finally opened up to the East and this meant 3 or 4 ships were picked off from the Mediterranean. However, the build up of tonnage in the region meant that rates were unable to make any gain from the activity. LR1s fared pretty badly this week. It has been much quieter than recent weeks and as such we’ve now seen rates for AG/Japan slip quietly from 125 to 120. Some stems remain for December, but we fear that all the Korean and Japanese naphtha requirements are now covered. There are a few west cargoes remaining in the market, but otherwise it appears that the market is already settling down for the Christmas period.

Thanks for listening