In Hellenic Shipping News 10/10/2016
Tanker demand has returned to higher ground, with the latest positive trend being evidenced over the course of the past week as well. In its latest weekly report, shipbroker Charles R. Weber noted that “VLCC demand in the Middle East remained strong for a second‐consecutive week while demand in the West Africa market rebounded, narrowing supply/demand fundamentals in leading rates across all global routes to accelerate the pace of a rally which began last week. The Middle East market observed 40 fixtures for the week, one more than last week’s strong pace and 55% more than the 52‐week average. Meanwhile, the West Africa market observed six fixtures, representing a 50% w/w gain and boosting the region’s four‐week moving average of fixtures to a ten‐month high)”.
The shipbroker noted that “the demand strength has helped to absorb surplus tonnage and sets the market up well to observe strong Q4 upside. We note that there are currently 25 units remaining available for Middle East loading during October, against which a likely 12 additional cargoes will materialize. Once factoring for West Africa draws, which could draw six of the uncovered units (at least three cargoes are outstanding at writing), the likely‐end October surplus is seven units. This compares with a Q3 average of 20 surplus units and is more closely aligned with the 8 monthly surplus units observed during H1, when AG‐FEAST TCEs averaged ~$54,748/day”.
C.R. Weber expects “that the low surplus facing charterers as they progress into November Middle East dates will allow rates to extend gains. Thereafter, rates should remain elevated given the likelihood of sustained elevation of West Africa and Middle East demand – with the latter potentially expanding from strong regional refinery maintenance towards the end of 2016 which will leave more cargo available for export. Meanwhile, Venezuelan exports have improved recently and the recent delivery of a light crude diluent cargo which had previously been among a group of tankers waiting to discharge at Puerto La Cruz amid a payments row suggests that blending operations could translate to further export length”.
Meanwhile, in the Middle East, the shipbroker said that “rates to the Far East added 16 points over the course of the week to conclude at ws55. Corresponding TCEs surged 88% to conclude at ~$33,782/day (basis China). Rates on the AG‐USG c/c route observed a gain of 8.5 points. Triangulated Westbound trade earnings, benefitting from the stronger AG‐USG route and a modest hike in CBS‐SPORE rates, jumped 24% to conclude at ~$42,882/day”.
In the Atlantic basin “the market remained tight amid the fresh surge in West African demand and after Caribbean supply/demand fundamentals narrowed on earlier regional demand strength and fewer voyages into the region. Rates on the WAFR‐FEAST route added 15 points to conclude at ws65 with corresponding TCEs rising 70% to ~$53,882/day. Rates in the Caribbean market were stronger as a spate of fixtures for voyages from Brazil and Uruguay allowed owners to command gains. The CBS‐SPORE route added $350k to conclude at $4.20m lump sum”.
In the Suezmax market, “rates in the West Africa Suezmax market remained under negative pressure this week as low cargo availability saw, demand levels decline. Rates on the WAFR‐UKC route shed 5 points to conclude at ws82.5. The recent decline in Suezmax rates comes, ironically, in spite of rebounding Nigerian crude supply as the corresponding narrowing of pricing differentials between West African grades and alternatives narrowed and Saudi OSPs disfavorable to Asian buyers pushed a portion of their interest into the West Africa market. These factors enabled the VLCC share of the October program to double from the September share. As such, less cargo has been available for Suezmaxes and the October Suezmax program has observed 40% fewer cargoes than the September program thus far. However, with VLCCs having progressed into November dates, we note that the situation appears to be shifting with VLCC coverage of October’s final decade having been low (likely to do with lingering uncertainties regarding the security situation in the Niger Delta region where oil infrastructure is vulnerable to militant attacks)”, said C.R. Weber.
The shipbroker noted that “whereas 15 VLCCs were fixed for cargoes loading during October’s second decade, just six were fixed for third‐decade loading. Thus, stronger Suezmax demand during the upcoming week is likely and should limit further losses and potentially allow owners to command fresh gains. Further forward, whilst regional VLCC demand is likely to remain elevated from the low levels observed during August and September, it should moderate as Saudi OSPs for November offer discounts to Asian buyers. This implies a more balanced distribution of West African cargoes between VLCC and Suezmax which, together with seasonal factors and progression from European refinery turnarounds, should allow Suezmaxes to observe directional strength during the remainder of Q4”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
