VLCC market news time… Week ending Oct 18By james tweed • Oct 18th, 2013 • Category: Tankers
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According to various global sources Chinese importers have set a record in September for barrels per day, rising by 7.4% through the month, to approximately 6.4m barrels/day. At the same time the USA has again cut back its imports as it strives for self-sufficiency. Meanwhile, the Gulf states are producing more oil than ever before with Saudi Arabia; Kuwait, the UAE and Qatar setting aggregate production records in each of the past three months, accounting for 18% of global demand in September. As a result, they are catching more of the fast emerging Asian market. India imported 44% of its crude from Saudi Arabia, Kuwait, Qatar and the UAE in July, up from 36% in 2011, whilst China relies on these countries for a quarter of it’s imports, compared to 21% in 2007. These increases, last month, have acted to take some of the slack out of the tonnage list and serve as a backdrop to the firmer tanker market we have today.
The weeks where VLCC owners are able to claim the upper hand are few and far between, however this week has been one of them, through persistence and hard trading owners have managed to push the market up to at least 270 at 40 for AG/East. While a rise of 3 Worldscale points since last week might not seem like a huge achievement, with the way the tonnage list is weighted this is patient work from ship owners and represents a solid base from which the market can improve further.
At the earlier stage of the week charterers recognised that few October stems remained and that we would shortly be fixing November laycans, those who studied the list knew there was still an overhang of vessels but less so from previous months and knew that better approved vessels would start to demand a premium. The canny started to pinch ships off the market and before long rates had moved from 37 to 38.5. By Tuesday morning there was significantly more AG cargo enquiry, as more charterers saw rates moving up and entered the market, creating more firmness and confidence amongst owners. This is a very good sign for owners since we have a genuine enquiry based market at 270 at 40 with potential for that to move up further. ‘Slowly but surely’ tends to build a stronger, longer term market than short term rate hikes built on distressed cargoes. The AG/Western players were not so involved in the market this week since they had already stepped forward into the first decade of November and probably thought throwing more enquiries into a firming market wasn’t wise.
The West Africa market has been slightly more subdued, but has strengthened in line with the AG. Chinese charterers pushed loading dates out into the second decade of November for West Africa/East and freight rates up beyond 40 to 42 levels. Vessels ballasting from the east will be concentrating on the AG, hence any replacements will come at a hefty price. West Africa/US Gulf has not been tested, but again mimics the firmness elsewhere. From the Indian charterers this week, there was no fresh activity for second decade November laycans out of West Africa. IOC have ballasted one of their time charter vessels for a stem out of the region, which takes their regional total to 3 stems for the first decade. IOC were reported to have bought 4 VLCC stems from Nigeria for November and we have seen 3 being covered already. We expect to see cargoes for the last decade of November from BPCL and HPCL next week, and due to a firming market and a balanced tonnage list, we are assessing West Africa/west coast India at $3.6m and West Africa/east coast India at $3.9m. So far for the month of November, we have recorded 10 VLCC fixtures with the furthest out cargo loading dates being 22-24 November for West Africa/China.
The Caribbean, much like West Africa has been quiet. However, sharing the same pool of vessels available for the West Africa, in theory rates should have also improved to high $3m levels for Caribbean/Singapore voyages. BP were reported to have fixed from Hound Point to Korea at $4.8m level but the details remain unconfirmed. Meanwhile, the fuel oil arbitrage movement from continental Europe to Singapore are not supporting freight levels for the moment.
The 30-day availability shows 53 VLCCs arriving at Fujairah, of which 8 are above 15 years old, this compares to 53 last week. The total number of fixtures reported for October is 130, slightly more than expected, hence the overhang into November was less and the availability of vessels in the first decade was also slightly down. It is also worth noting that the end of October was a particularly busy time with 50m barrels being lifted over the final decade, taking the total to the month to 115m barrels, of which 22 VLCCs were recorded, it should be noted this does exclude own program and some Chinese/Chinese COA deals.
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