VLCC rates’ outlook flat, as smaller tankers expected to keep on suffering

In Hellenic Shipping News 11/07/2016

Looking for the VLCCs to find a direction in the week ahead, with a flat outlook at the moment. Smaller crude tankers continue to take a beating with little relief in sight. Atlantic basin triangulated returns have fallen below $10k/day, which is sure to place downwards pressure on term charter rates.

In the Arab-Gulf dirty market, “rates trended sideways through most of the week. The cargo volume moved over the past three months is similar to the volumes lifted during the same period last year, but the supply of additional tonnage and decreased activity in west Africa were weighing on rates. Next week should see the start of August dates and the cargo volume will set the direction going forward. The economics of short term floating storage are looking better, and if this continues to develop it could bring an otherwise pessimistic outlook back into bullish territory”.

In the Altantic Basin Dirty Market, the shipbroker noted that there was “little immediate cause for optimism in Atlantic Basin at the moment. VLCC rates continue to hover around the mid $3 mn lumpsum range, treading water in line with the overall market. Suezmaxes trended downwards as the supply of ships continues to remain high amid ongoing production outages in west Africa. Aframaxes remain under pressure as well with ample tonnage for the cargo volumes. Some ships are ballasting away to Europe, which could help with the supply of tonnage should activity increase. Panamaxes are suffering from the same malaise. Returns appear to be below OPEX levels for Aframaxes and Panamaxes on the benchmark runs”.

Meanwhile, in the Atlantic Basin Clean Market, “a slight tick upwards in Atlantic Basin sentiment but the amount of tonnage available for the week ahead looks set to increase. Still very positive to see an increase in cargo volumes leaving the US. Supplies of gasoline in the US remain abnormally high, and the gasoline arbitrage trade from Europe to the US will likely be quiet. Several tankers are being held offshore in the US Gulf and Atlantic coasts. Distillate is reportedly moving from the AG and India to Europe, which will keep the US distillate arbitrage under pressure”, MJLF Research concluded.

Meanwhile, in a recent note, shipbroker Poten & Partners commented on the leading charterers of the tanker market, after the cross of the mid-year mark. According to Poten’s data, no major changes can be spotted, as the top seven charterers are exactly the same as last year. “Unipec is still on top and even expanded its lead slightly (from 13.4% of the total in 2015 to 13.8% in 2016 YTD). Not surprisingly, the leading charterers hail from China (Unipec, Petrochina), India (IOC, Reliance), complemented by the super-majors and the leading traders. As a reminder, these rankings are all based on reported spot fixtures. In the VLCC segment, Unipec continues to be the dominant spot charterer with 258 reported fixtures, equivalent to the volume of the next five largest combined! Bahri remains a significant player in the VLCC market and its listing as No. 4 in the ranking of reported spot market fixtures is not a correct reflection of their real influence in the large vessel segment”, Poten said.

Similarly, “in the Suezmax segment the traditional oil majors still rule, with all the majors that are remaining of the original “Seven Sisters” (Chevron, Shell, BP and ExxonMobil) represented in the top 10. Chevron continues to lead the pack, followed by Repsol (2nd) and Unipec (3rd). International oil traders are the best represented in the Aframax segment. Vitol maintains the lead, while 2nd placed ST Shipping has moved up the ranks (up from 5th in 2015). Trafigura also improved their position relative to last year (from 9th to 6th). These rankings serve as a reminder for tanker owners that, despite all the changes in the world’s economic and political landscape, changes in the oil market take time and long-term trends remain in place. No surprises here”, Poten concluded in its weekly report.

Nikos Roussanoglou, Hellenic Shipping News Worldwide