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Our weekly review of the tanker markets. June 22

By • Jun 25th, 2012 • Category: Tankers

** Due to audio problems, there is no recorded podcast this week, but you can read about the markets below:

Thanks for downloading the Tanker Market report podcast from Coracle and Braemar Seascope for June 22nd 2012. This report looks at the VLCC, Suezmax, Aframax and clean products markets.

June 25th is Day of the Seafarer. We hope that you enjoy the quiz found at

As the oil price falls, we note that Iranian oil stored on tankers at sea has increased to as much as 42m bbls, according to the International Energy Agency with Iran adding nearly 10m bbls of floating storage by the end of last month. The report showed about 17 VLCCs and 7 suezmaxes holding crude, with another estimated 25m bbls being kept in onshore tanks.

In terms of the AG VLCC market, there were signs of life at the beginning of the week, with owners trying to corral charterers into a bottleneck to increase rates. Unfortunately, when 11 people offer for the same piece of business it is very difficult to push rates much higher. The odd weak link meant that rates only drifted up from 270 at 40 to 45. AG/West has been hovering around the 280 at 30 mark and with softer bunkers it looks like rates will remain at these levels for the moment. In the West African market this week, IOC were the only active Indian charterer. They entered the market for Angola/EC India off 24-25 July dates and received 10 offers for their quote, with an even split of genuine Atlantic ships and eastern ballasters, evidencing the oversupply of tonnage in the region. The cargo was fixed at $3.1m due to the cargo being an Angola load only with no NMA dues applicable. The July programme from Indian charterers from West Africa looks to be more or less complete. The 30 day availability index shows 49 VLCCs arriving at Fujairah, of which 6 are over 15 years old compared to 45 last week. June has seen 133 fixtures and so far for July there have been 34, of which 31 have been fixed in the first decade.

With the freight rate for 280 AG/US Gulf at 30, the same as last week and bunkers being down $26 to $611 a tonne, owners earnings have swung from minus $1,000 a day to plus $1,000 a day. This compares with 270 AG/S Korea at 45, up 6 from last week and making owners $20,000/day.

Moving on to the Suezmax sector and as suspected, the low levels of first decade barrels have begun to severely impact Worldscale rates. A prompt W Africa/UKCont Med fixture at 90 did nothing to encourage bearish owners and expectations were quickly brought down to earth, with a 130 at 67.5 to the US Gulf. The well-populated position list (around 40 vessels were available for the first decade on Monday) was noted by charterers and rates dropped sharply thereafter. As the week draws to the end, levels of 60 to 62.5 for the US Gulf would ordinarily suggest a market bottom and whilst there will be strong resistance to dip below these rates, there is very little activity at present. Given the bargain deals potentially available, it is surprising to see so few charterers taking advantage, and one can only assume it is influenced more by cargo availability than choice.

Last week’s excitement for Aframaxes in the Med and Black Sea continued through to the start of this week, with several charterers having to pay up for tonnage. As much as world scale 140 was reported on subs, however, as the week progressed, rates started to slip, with several fixtures being reported at under 100. As the Aframax market cooled off, so the Suezmaxes lost their buoyancy aid. Much like the West African market, a tonnage list showing 16 vessels that could still make end-month East Med dates, threatened to take its toll…

The North Sea and Baltic Aframax markets started the week at a bit of a gallop as charterers looked to cover the end/early Baltic stems. Rates, however, failed to match some owners’ expectations as the length in the tonnage list was just too much to recover from. Primorsk stems are now fixing up to the middle of the first decade and it looks like we can expect a quiet couple of days, which will help to replenish the tonnage lists before the next flurry. Looking into next week, we expect rates in both the North Sea and Baltic to remain flat at 80 at 95 and 100 at 75 respectively on crude.

Looking at the clean markets and it has been a quiet week for the LR2s, with little or no activity for naphtha cargoes from the Middle East region to the Far East. The movement of gasoil from S Korea to Singapore-Indonesia and the steady, if not excessive, flow of gasoil to the West, is picking off the last of the current batch of the new buildings, although some gave up and just fixed into local dirty business, leaving a dearth of fresh deliveries before the end of July now. Jet fuel continues to take the occasional LR2, but rates have stuck steadfastly below $2.3m, although that rate is for basis WC India loading. Ships loading from the Far East are taking a premium to these levels due to the lack of western players able to fix into the region with naphtha. It’s an interesting time as the tonnage list has looked tight for a while now but seems to be unable to significantly affect the market. In contrast, it was a busy week on the LR1s and combined with the clear out of the cheap new building ships added to the possibility that some owners of clean and coated ships may switch into dirty trading due to the lack of faith in any imminent recovery in the products market, *could* mean that some improvement in freight rates will be possible.

The LR1s’ story this week has been very different in that we’ve seen a high level of activity, although a good share of it has been for shorter haul inter-Middle East region voyages. For the smaller MR’s it was a lacklustre start to the week in the AG, with abnormally low levels of activity. In the middle of the week the market then came to life with a flurry of activity. The prompt position was especially busy and pretty much all the well-cubed boats found themselves on subs. As a result, there were rumours of some higher numbers being achieved for short haul runs in and around the AG. The long haul markets continue to fix well forward, but in different directions of each other. TC12 remains flat and soft, with 35 at 118 being the going rate for naphtha to Japan. The AG/UKC market found some legs as finding a jet suitable vessel willing to enter the very poor Atlantic market proved difficult. There are rumours of a $100,000 improvement in rates from last week.

In the West it was another week with no shortage of activity in the Continent, but it did come back to the old problem of an over-tonnaged market yielding absolutely no volatility in rates. Apart from the odd positional exception, rates have been firmly stuck to 37 at 120 on TC2. Looking forward it’s hard to see any significant change.