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US oil export policy changes. How might the tanker market change?

By • Jun 27th, 2014 • Category: Tankers

The Coracle tanker market podcast for June 27, 2014 in association with Braemar-Seascope

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Thanks for downloading the VLCC Tanker Market report podcast from and Braemar Seascope for June 27th 2014.

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Now the VLCC report and headlines have appeared in the mainstream press over whether the US is changing its policy concerning the export of crude oil. Congress banned exports of crude when it passed the Energy Policy and Conservation Act after the oil embargo of 1973-74, but over the last few years, exceptions have been made, especially to Canada who in turn sold the refined products back to the US. However, the Obama administration is clearing the way for exports of minimally refined US oil in the form of ultralight condensate. The US has issued 118 licenses to export crude since October last year. That compares with just 22 licenses issued during the whole of 2007. Federal officials have confirmed with two energy companies they can legally export shale oil that has passed through a distillation tower as condensate. Obviously in the short term these developments will not affect the tanker markets, however in the longer term the entire trading pattern of the VLCC fleet could be affected should crude imports begin.

This week charterers have continued to enter the VLCC market with a similar amount of volume as the previous week, and finally tipped the balance in the owners’ favour. We have now recorded 40 fixtures in the first decade of the month which is reminiscent of the winter market when freight rates were strong. There is not a shortage of tonnage in the Arabian Gulf; rather the recovery has been enquiry-led with as many as eight to ten different charterers in the market at the same time, giving owners the confidence to push for higher freight rates.

However, one can imagine that once the volume of cargo starts to calm down, owners will be looking to fix at prevailing levels rather than asking for more. Current earnings are respectable for this time of year, and it is already obvious that owners are looking to try to lock in the longer voyages such as west Africa/East to secure earnings for as long as possible, rather than fixing a short voyage and expect rates to move higher again.

The 30 day availability index shows 100 VLCCs arriving at Fujairah, of which nine are over 15 years old, compared to 91 last week. The month of July has seen a busy start with 40 cargoes covered in the first 10 days, and a further 15 cargoes up to the 15th July. We expect a similar volume to last year when the July count was 128 cargoes, and the average cargo count for this year now stands at 115 per month. Sentiment over the last day or so has softened slightly due to the reduced volume of cargoes entering the market within the Arabian Gulf.

The freight rate for 280 AG/US Gulf via the Cape is 28, up 3 worldscale points from last week. Bunkers are down $4 to $616 a tonne.

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