Tuesday, October 27, 2015

Global VLCC Tracker: North Asia, West African flows slump in September

CMES, Sinotrans & CSC to form VLCC joint venture

* Turnarounds, delays knock North Asian landings to one-year low
* Slack in Chinese demand for Angolan crude picked up by Europe, US
* West African sailings tumble to lowest in 15 months

VLCC landings in North Asia during September fell to their lowest level in a year as refinery turnarounds, ullage problems, weak refining margins, and typhoon-related delays dampened demand, cFlow, Platts trade flow software, showed.

High regional inventories combined with rising freight rates also compounded the wider trend and helped drive West African sailings to 15-month lows.

Arrivals into North Asia, the key VLCC landing region, slipped to 161 over the month, down from 171 in August and last lower in September 2014, while sailings from West Africa -- at 24, a drop of six -- were at lows not seen since June 2014.

VLCCs haul the bulk of global crude oil shipments, with a small number of tankers also carrying fuel oil, but mainly on a few routes, such as from Rotterdam to Singapore.

In China, low margins, and high product inventories weighed on VLCC inflows -- particularly from Angola -- which dropped to 82 ships, falling by three to the lowest level since May.

Japan's arrivals fell to 41, down by three, while South Korea's inflows rose to 35 from 34 against landings in Taiwan that were flat on the month at 12.

Based on direct VLCC voyages to China, the top five suppliers in September were Saudi Arabia, Angola, Kuwait, Oman and Iran, while over the first nine months of this year, the top five were Saudi Arabia, Angola, Iraq, Oman and Iran.

However, as up to a third of vessels tend to co-load -- or pick up cargoes from more than one port -- several of these ships loaded a range of other crude oils prior to departing their respective regions.

From Saudi Arabia, 14 ships arrived in China and arriving from Singapore were eight vessels, as well as two from Japan, originally loaded in Saudi Arabia, and two from South Korea, carrying cargoes from Qatar and Kuwait.

Angola sent nine tankers to China, marking a five-month low, as softer margins and run cuts of 10-15% announced for October dented Chinese refinery demand.

The West African producer's crude is heavily dependent on China, which typically takes 40-60% of its exports every month, and Unipec, the trading arm of Chines state-owned Sinopec, is the largest buyer of Angolan crude, often taking 35-40% of the monthly export program.


With Angolan sailings to China in a downtrend recently, European -- largely Portuguese and Spanish -- and US buyers have been stepping in, with European refineries having increased buying, stimulated by strong margins.

In the US, Gulf Coast refineries increased demand for Angola's heavier grades such as Dalia and Saturno to be used for blending.

However, these trans-Atlantic exports were shipped entirely on Suezmaxes, with VLCC flows between Angola and the US at standstill since September 2014, a product of the boom in US tight oil.

While only around 20% of Middle Eastern exports are routinely shipped on Suezmaxes, the volume in West Africa is significantly higher, at roughly 70%, with most of the Suezmax flows bound for European markets.

An estimated 10-15% of daily global oil shipments are also sent on Aframaxes, but these voyages are largely limited to intra-regional movements in parts of Europe and Southeast Asia.


Saudi sailings in September, albeit up by one from August to 119, still hovered at levels last lower in February. From the UAE, 42 tankers sailed, up from 38, while from Iraq's Basrah, 33 ships left, a drop of two. Departures from Iran eased to 18 from 19.

The bulk of Saudi sailings went to South Korea, Japan, the US, Egypt and China, with the exports to Egypt nearly all bound for Europe, as Egypt's Sumed Pipeline -- running from Red Sea port of Ain Sukhna to the Mediterranean's Sidi Kerir terminal -- acts as a key trans-shipment route between Europe and its Gulf suppliers.

The UAE-sailings top destinations were Japan, China, South Korea, Malaysia and Singapore, while China, Egypt, Singapore, India and South Korea were the top landings countries for Iraq's tanker flows.

In Iranian departures, the bulk of ships -- excluding those that went to co-load -- sailed for China, South Korea, India and Japan.

Volumes leaving West Africa stumbled to their weakest levels in 15-months, with 24 VLCCs heading out of the region.

Angolan sailings dropped to their lowest count in six months, at 14, while the number of ships departing Nigeria eased to six, last lower in June.

In addition to weaker Chinese buying appetite, the uptrend in freight rates also curtailed demand for Angolan crudes across several regions.


September saw freight rates pressured to the upside along key VLCC routes, largely driven by a reduction in tonnage stemming from weather-related delays and ullage problems in Asia.

Further support for rates came from a major increase in charterer demand, with a particularly heavy Basrah loading program restricting the number of potential eastern ballasters to West Africa.

Along benchmark VLCC routes, monthly average rates from PG-Japan topped Worldscale 53.31, up 40% from August, while PG-China rates jumped to w52.81, marking the same monthly percentage increase, according to Platts assessments.

From West Africa to the Far East, rates jumped to w54.83, an increase of 18% on the month prior.

Elsewhere, from the Persian Gulf to west coast India rates rose to w65.18, up 36% from the previous month.
Global VLCC Fleet: Monthly Flows
Total N Asia161171-10
South Korea35341

Saudi Arabia1191181
Iraq (Basrah)3335-2
Total W Africa2430-6

--Sierra Highcloud, sierra.highcloud@platts.com
--Edited by Dan Lalor, daniel.lalor@platts.com

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