In Hellenic Shipping News 21/04/2015
The tanker market, especially the larger ship classes, appear to be going from strength to strength these days, as last week marked fresh gains in VLCC rates in the key Middle East and West Africa markets on a low availability count and earlier demand strength. According to the latest weekly report from shipbroker Charles R. Weber, “on the demand side, however, the April Middle East cargo program came to an abrupt conclusion with fewer cargoes than anticipated. The month’s program there yielded 110 cargoes – which is 8% below our earlier expectation. The shorter program comes despite a relatively modest 3% m/m decline in cargoes from Iraq’s Basra terminal and amid pronouncements of near-record oil output in Saudi Arabia (this week, the kingdom submitted data to OPEC showing a 658,800 b/d m/m production rise during March, which would imply higher April exports following a usual lag between production changes and exports).
CR Weber added that “further deliveries of VLCCs to time charterers under contracts agreed earlier in the year may have contributed to the slower spot cargo tally as some of these and earlier TC deliveries serviced internal cargo programs (as opsopposed to the relatively more common external relets observed during Q1). Additional tempering of expectations resulting from the Saudi production boost is the possibility of diversions to YASREF’s new 400,000 Yanbu refinery for inventory building ahead of its utilization hike during the coming months. A total of 17 fixtures were reported in the Middle East market, marking a 47% w/w decline”.
Meanwhile, “in the West Africa market, demand declined for the third consecutive week to 6 fixtures, off 14% w/w, but still marginally above the 52-week average. As the market progresses more aggressively into May Middle East dates during the upcoming week, the rebounding of activity should help to prevent much rate downside from materializing on the back of this week’s lull. While this could help to support rates around present levels during the upcoming week, we note that surplus units carrying from April to May dates tallies at 10, which narrowly exceeds the previous YTD high of 9 at the conclusion of the January program and represents a doubling from the number of units uncovered at the conclusion of the March program”, said the shipbroker.
It added that “moreover, sources indicate four fewer VLCC stems during the May Basra program, as compared with the April program, despite an overall increase of exports from the terminal while Saudi’s cargo supply remains uncertain given the observed disconnect between production and cargo tally in April. While potential demand gains in the West Africa market resulting from European refinery maintenance (pushing more cargoes on VLCC tonnage to other regions) during May could help limit rate downside, a modest degree thereof is expected to materialize after the upcoming week’s Middle East demand surge on the back of the recent tonnage build. Middle East Rates to the Far East gained 10 points w/w to an average of ws62.8. Corresponding TCEs gained 25% to an average of ~$62,435/day. The present assessment of ws62.5 yields ~$61,735/day. Rates to the USG via the Cape observed an average of ws33.5, representing a weekly gain of 5.8 points. Triangulated Westbound earnings gained 6% w/w to an average of ~$61,094/day”.
In the Atlantic Basin, CR Weber said that “the WAFR-FEAST route added 5.8 points w/w to an average of ws61. Corresponding TCEs rose by 13% to an average of ~$57,636/day. In the Caribbean market, rates retested lower with the CBS?SPORE route shedding $250k to the $5.7m level; rates steadied at this level following a rebounding of activity. As regional exports are expected to remain steady and regional VLCC arrivals moderate, rates should hold around this level through at least the upcoming week. US Crude Stocks (EIA) Last Week 483.7 Mbbls Week y/y +22.7% US Gasoline Demand (EIA) Last week 8.914 Mb/d Week y/y +3.5% 2015 2014″.
On the Suezmax tanker markets, “though demand in the West Africa Suezmax market remained relatively lackluster this week in the absence of significant volumes, rates posted a modest recovery from recent lows on the back of charterer interest in prompt dates to service late purchases of April cargoes. With few units available for these relatively prompt cargoes, rates on the WAFR- UKC route gained 7.5 points to a closing assessment of ws75 with the WAFR-USAC route rising by the same amount to ws72.5. With prompt units having been removed from the list of availability, rates should remain elevated early during the upcoming week as charterers move towards normalized forward dates. Thereafter, stronger demand should materialize and support an extending of gains. We note that VLCCs have moved beyond first-decade West Africa dates having covered 23% less cargo volume than during the first decade of the April program, leaving more early May cargoes expected to be oriented on Suezmaxes”.
Meanwhile, in the Aframax market, CR Weber noted that “despite weakening fundamentals and softer trend during recent weeks, this week saw rates post a modest rebound from lows observed at the start. On the CBS-USG route, fixtures touched the mid-ws130s on Monday before a Tuesday fixture was reported at ws150. Market participants indicate that the higher rate resulted from a charterer working off of inaccurate information rather than any substantiating changes to regional supply/demand fundamentals. Simultaneously, owners were more bullish on reports of the higher rate which saw the market trade in the ws137.5-147.5 range through the remainder of the week. The route concludes at an assessed ws147.5 but fundamentals imply that rates should prove softer during the upcoming week. We note that overall demand was weaker this week with the tally of fixtures dropping 13% w/w to 16 and the four-week moving average dropping 7% w/w to 13″.
Finally, in the Panamax segment, CR Weber noted that “the Caribbean Panamax market saw rates remain soft this week on slower demand and a relatively more flexible list of available units. The CBS-USG route lost 5 points to a closing assessment of ws135. Rates could post further modest losses during the upcoming week as more units reappear on position lists”, it concluded.
