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Some better news for crude tanker owners. Feb 17 report

By • Feb 17th, 2012 • Category: Tankers

The Coracle tanker market podcast for Feb 17, 2012 in association with Braemar-Seascope

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Thank you for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for February 17th 2012. This report will look at the VLCC, Suezmax, Aframax and clean products markets.

Reports this week remind us of how quickly tragedy can unfold when tanker owners and charterers are forced to arm their vessels against possible pirate attacks. With independent security teams patrolling the high seas, it was only a matter of time until we had an incident such as that of the Mt Enrica Lexie product tanker. According to
various reports, two Indian fishermen have been shot dead as they were mistakenly identified as Somali pirates by the on-board security team. Such an incident is very difficult to guard against, since owners and charterers have been left to defend themselves against piracy attacks due to a complete lack of a coherent international strategy. Billions of dollars of military hardware is in the area, however they are largely toothless with only the Indian, Chinese and Russian Navy’s willing to engage. We will consider the implications of this incident in a future podcast.

Meanwhile, in the AG VLCC market owners have been able to push rates up to the low 50’s, and are looking like they have the wind in their favour for the moment. This is on the back of a busy February clearing out a lot of tonnage: perhaps the increased pooling arrangements are starting to take effect. The strong bunker prices at Fujairah have also contributed to rates remaining firm, especially for the longer AG/US Gulf voyages. Cargoes continue to be quoted daily and owners’ confidence is growing. West Africa has been steadily fixing and the volume of cargoes has tipped the balance in the owners’ favour.

The 30 day availability shows 63 double hull VLCCs arriving at Fujairah, which includes 9 over 15 years old, compared to 54 last week. So far for the month of March, we have seen 17 fixtures reported, which follows the bumper 131 for February. The freight rate for 280 AG/US Gulf is 33, up 1 from last week. With bunkers at $731/tonne, the same as last week, owners’ earnings have improved to $5,300/day, up from minus $7,250/day last week.

Turning to the Suezmax markets and the Mediterranean and Black Sea markets saw good levels of activity. The February Black Sea program was finished this week and the rates moved up from worldscale 75 to somewhere around 90. There may be a little pause before we see March Novorossiysk dates, but the list looks short enough to resist a quiet period. Unfortunately for owners, the delays in the straits remain at 2 days northbound and southbound: any increase in that would change the sentiment quickly. The amount of days that Novorossiysk has been closed in February should have a knock-on effect on the March market and we may see that it is a busier month. Owners will certainly be hoping that this is the case.

Aframaxes in the North Sea and Baltic have experienced a decline in demand recently and an ugly amount of prompt tonnage still remains on the lists. We expect rates to remain flat into next week, and with IP week in London, things could be even quieter. In the Baltic, Primorsk stems were all but covered with only one for the month of February still to cover. Loadings of Urals from Primorsk for 29th February to 4th March are scheduled to reach 900,000 tonnes , that’s 6.6 million barrels or 1,316,340 barrels per day and this equates to a drop of 292,520 bpd from the corresponding period in early February. In the Mediterranean and Black Sea we have seen rates firm slightly on the back of sentiment initially, followed up by substantial enquiry. Reports of the Black Sea icing up led to thoughts of delays and replacement fixing, meaning owners became excited and bullish, and, although this didn’t materialise, the mind-set was in place across the board for owners. This in turn put upward pressure on rates when enquiry picked up. The prompt tonnage is slowly being cleared out, and with charterers starting to cover their early March cargoes, this market has the potential to firm further.

Now we look at the clean markets. LR2 rates in the AG continue to drift sideways and believe it or not, even further downwards. There are numerous vessels still looking for coverage before the end of February in a market which cannot support them. There just isn’t enough cargo moving. Volumes have been very low this week. Contract naphtha continues to be fixed on Far Eastern tonnage, with rumours of a new low on subs 75 at 82.5 for AG/Japan, although no vessel name or account has claimed this fixture yet. Western owners have been touting FOT business this week for AG and WC India / West cargoes. This is a market that has seen rates fall a further 100 to 150,000 dollars in just 4 days. It’s a very bad market. Bits and bobs of gasoil fixing for S Korea to Indonesia are helping some owners triangulate their earnings; offering some relief from the current conditions. LR1s, in a similar vein to the LR2s, are bumbling along. Rates are flat with no signs of picking up any time soon. The market is pegged to 55 at 100 for AG/Japan and $1.7m for AG/UK Cont. Looking ahead, there isn’t a great deal of outstanding cargo, which will worry owners based on the length of the tonnage list.

MR activity has been greater this week, however with so many ships around, rates being fixed have been at new lows and with no signs of market recovery, owners have been touting for any cargoes to get their ships to the UK Cont. Up on the Continent and despite the week on TC2 ending some 15 points higher than at the start, it’s been more a case of a couple of charterers getting caught with relatively prompt barrels, rather than a concerted effort to move the market.

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