Contango returns to the tanker markets…By james tweed • Jul 18th, 2014 • Category: Tankers
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Now the tanker market and there was some excitement in the VLCC market when the word ‘Contango’ was once again being discussed, with opportunities to put crude oil into floating storage for future delivery. However, the spread only widened by $1/barrel for front month Brent before the August contract expired on Wednesday. This was nothing like the situation a few years ago that had such a dramatic effect on the market. The sanctions against Russia so far have had little impact on the shipping markets and, since the Russians are not involved in VLCCs, none on the VLCC segment.
This week has been a story of charterers stepping back from the market a little, allowing the available tonnage list to build. In any market there are weaker links and a south Korean charterer was able to fix a less approved VLCC at 280 at 43 off 28 July. Owners had been able to keep freight levels at just about the 270 at 50 mark for modern, fully approved vessels, but when a favoured Basrah / South Korea cargo entered the market, even an independent Greek owner was unable to turn down 270 at 45. This undermined the confidence of rest of those ships in position, and enabled other charterers to step in and fix at 270 at 45 to 47 levels. As is often the case at the end of the month, early next month laycans brought in quite a few cargoes destined for the western hemisphere, the latest of which was fixed 280 at 26.5 via the Suez for US Gulf and 27.5 for UK Continent and an additional point for going via the Cape.
West Africa has been less active but has reflected the softening AG market. At the beginning of the week, rates were looking quite resilient at 260 at 52.5 for West Africa / China with owners refusing to consider less. However, a cargo was quoted for mid-month laycans and an owner decided to accept the charterer’s freight ideas just quarter of a point below 50. This might have seemed like a step down, but this has since proved to be a sensible move, as the rates quickly fell to 47 and the dates are moving into the final decade of the month. With the strength of the Suezmax market, charterers have tried to fix a couple of ships West Africa / UK Continent or US Gulf, at 70 and 62.5 respectively.
The Caribbean market was subdued and charterers have not enjoyed the softening seen in other areas. The week started with a fixture reported off end/early at $4.9million for Caribs/Singapore, and there wasn’t much else reported over the week.
The 30 day availability index shows 83 VLCCs arriving at Fujairah of which 8 are over 15 years old compared to 82 last week. July finished with a month total of 114 and we are 7 fixtures into the beginning of August, so there is still plenty of fixing to be done but there needs to be heavier concentrations of fixing to turn the market back into owners’ favour.
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