In Hellenic Shipping News 30/03/2015
The tanker market is still riding on a high. According to the latest weekly report from shipbroker Charles R. Weber, over the course of the past week, “rates in the VLCC market trended modestly higher at the start of the week as charterers’ progression into the April Middle East program was met with a lower number of carryover units from March dates. As the week progressed, however, inquiry levels in the Middle East remained light even as charterers had largely received their April stem confirmations which led to fresh concerns by market participants over the likely extent of the month’s program”.
According to the shipbroker, “statements by Saudi Arabia’s oil minister reinforced earlier reports indicating a recent rise in Saudi’s oil production to around 10 Mb/d, which should imply greater exports. An earlier report by PIRA suggested the same level and indicated an expectation that the additional volumes would be bound for points in Asia and the United States. The disparity observed between a Saudi production hike and Middle East export volumes has widened while the former may have partly tempered the traditional weakening of owners’ resistance which tends to follow periodic demand lulls and thus limited rate losses. Rates on the AG-JPN benchmark route concluded at ws50 last week before rising to ws52.5 early this week and ultimately concluding at ws51.5. To date, 40 April Middle East cargoes have been covered, leaving a further 22 to go through mid-month. Against this, there are 30 units available through the same space of time. Draws on these units to service West Africa stems declined from previous weeks’ highs this week as much of the VLCC-oriented April program there has been covered and with May stems still some weeks away, demand there could be light, implying fewer draws on Middle East positions and less to offset the eventual appearance on Middle East position lists of large commercial managers’ “hidden” positions. Accordingly, the implied Middle East surplus through mid-month of 8 units could rise going forward. Despite this, the supply/demand position of the VLCC market remains supportive of modest rate gains to accompany an expanding of activity levels during the upcoming week”, CR Weber noted.
Meanwhile, in the Middle East markets, “rates to the Far East rose by 0.8 point w/w to an average of ws50.7. Corresponding TCEs rose by 2% to an average of ~$47,494/day. Rates to the USG via the cape were assessed at an average of ws26.5, representing a w/w loss of one point from last week’s observed average. Triangulated Westbound trade earnings dropped 5% w/w ~$60,147/day on fresh losses in the Caribbean market”. Similarly, according to CR Weber, “in the West Africa market, rates on the WAFR-FEAST route lost 2 points w/w to an average of ws49. Corresponding TCEs were off by 5% to an average of ~$43,356/day. A large number of reported fixtures from Rotterdam followed the opening of fuel oil arbitrage opportunities to points in the Far East; many of these fixtures remain on subjects and as with many such plays failing rates tend to exceed those prevalent for VLCCs on normalized trades. Accordingly, should a large number of these fixtures fail they will likely appear on West Africa position lists and potentially lead to downside there out of step with usual correlations with rates in the Middle East market. In the Caribbean market, the rising number of units en route to the USG area continues to apply negative pressure on rates. The CBS?SPORE route lost $300k over the course of the week to a closing assessment of $6.3m. Sources indicate that Venezuelan crude supply could drop sharply during the second half of April due to field maintenance. This has heightened fears of an oversupplied VLCC market and could lead to significant rate downside going forward. At the present assessment, the CBS-SPORE route stands at a record high for this time of year and is 47% above the March average observed during the preceding four years”, CR Weber noted.
Suezmax
In the Suezmax market, it added that “the West Africa Suezmax market tightened early during the week as a fresh influx of cargoes saw demand rise out of step with demand. The demand gains came following two weeks of sluggish demand and the week’s tally of 19 fixtures represented a 134% w/w gain. Rates improved on this basis through the early part of the week, though slowing activity by the close of the week saw some of the gains pared. The WAFR-USAC and WAFR-UKC routes each concluded with a weekly gain of five points to ws85 and ws87.5, respectively. Given the fact that VLCCs are projected to command 51% of the April program, up markedly from 38% during the March program, Suezmax demand appears poised to pare back during the upcoming week. We estimate that just six further Suezmax fixtures will materialize within the second decade of the April program (as charterers have reached further forward recently), which implies a slow pace of activity during the upcoming week, which will likely see rates remain soft. Thereafter, with the spread in the final decade less heavily oriented to VLCCs relative to the first two decades (albeit at a greater share than observed during March’ final decade), rate downside should be limited when charterers move into the final decade, with a modest rebound possible on the corresponding activity gains”, CR Weber concluded.
