Markets – And the winners are - Aframaxes!

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The VLCC market ended last week at a slow pace.

 

Charterers had basically finished for November ex MEG and the market players focused more on the forthcoming ‘Bahri function’ in Dubai this week. 

 

Charterers continued to drip feed the market, but nevertheless owners managed to turn the recent soft/quiet trend around by forcing charterers to pay up, Fearnleys reported. 

 

Thus far, only BOT stems have emerged. Owners were looking for increased activity when the parties in Dubai were over and the outstanding stems are released. 

 

In the Atlantic, both West Africa and North Sea strengthened, as steady demand was recorded. 

 

Suezmaxes found some relief in a batch of West Africa east cargoes entering the market simultaneously on early Dec loading dates, but they received very limited interest from owners who did not want to commit vessels for low returns on long voyages. 

 

As a result, TD20 spiked at WS82.5 but had slipped earlier this week. 

 

The Black Sea and Med areas are currently stable being propped up by the rampant Aframax market. 

 

While the West Africa outlook will remain steady, we could see fallout if there is a reaction going forward on the Black Sea and Med rates, if Aframaxes become uneconomical. 

 

The North Sea and Baltic strengthened strongly last week, but have seen a slow start to this week. At the time of writing (Wednesday), North Sea and Baltic December dates could firm, as high activity in the Med and Black Sea drive momentum. 

 

In the Med and Black Sea, the market is going through the roof. With only a couple of ships to choose from, owners have been on the ascendancy, Fearnleys said. 

 

A couple of end-month Black Sea cargoes did not manage to find a ship last week, and as Turkish Straits delays kept increasing over the weekend, owners showed no mercy. 

 

For example, WS170 was on subs ex Black Sea, and there are still a couple of cargoes left in a tight window, so more high numbers will be paid this week, Fearnleys concluded. 

 

What is causing the strength in Cross-Med Aframax rates? 

 

Aframax Cross-Med freight rates saw a sharp spike last Friday, nearly doubling from WS80 to WS140 in a day, Ocean Freight Exchange (OFE), said.  

 

Rates have remained firm at WS140 since on the back of a combination of factors, including surging production in the region, which boosted exports, lending support to the tanker market as more barrels looked for homes. 

 

Key exporters in the region pumped more oil than ever, with Russian production setting a new post-Soviet record at 11.2 mill barrels per day in October and Libya returning to the market, OFE said. 

 

The start-up of Kazakhstan’s huge Kashagan oil field has led to an increase in CPC Blend exports, up from 600.000 barrels per day to 1 mill barrels per day in October. 

 

With exports from Kashagan and Filanovsky oil fields ramping up and Libya’s largest port, Es Sider, poised to resume exports in days, the Med crude market is likely to remain vastly oversupplied.   

 

As excess volumes in the region fill up onshore storage sites, oil companies have turned to floating storage as an option. There are up to 20 Aframaxes storing crude in the region, potentially adding up to 12 mill barrels at sea, which has reduced the list of tonnage available. 

 

The steep contango in ICE Brent prices may further induce charterers to book more vessels for floating storage, despite the spike in freight rates. The Brent M1-M2 spread widened to $1.18 per barrel last week, currently holding at $1 per barrel.  

 

Recent storms in the Black Sea have caused longer vessel delays of up to four to five days, further boosting freight rates, OFE concluded. 

 

Meanwhile, in Libya, a tanker reportedly sailed from Ras Lanuf with 600,000 barrels of oil last Monday, the first newly produced crude oil to be exported since the terminal reopened in September, a port official said, according to Reuters. A second tanker was due to berth at Ras Lanuf shortly. 

 

Ras Lanuf is one of four ports that forces loyal to eastern commander Khalifa Haftar seized in September. Three had been blockaded by a rival faction.

 

One of the ports, Es Sider, remains shut. At, Zueitina, an official said three tankers had loaded this month with a fourth expected, compared to about 20 tankers per month when the port was operating normally, Reuters reported.

 

In the charter market recent fixtures reported by broking sources included Frontline taking the 2011-built VLCC ‘Oceanis’ for 12 months at $32,000 per day.

 

Koch reportedly took the 2004-built VLCC ‘Xin Jin Yang’ for six months at $32,000 per day, while Staoil was thought to have fixed the 2004-built VLCC ‘DHT Condor’ for four option six months at $28,000 per day, plus the 2006-built Aframax ‘Affinity’ for three, option three months at $17,000 per day. 

 

Navig8 was said to have fixed the 2004-built Suezmax ‘Astro Polaris’ for 12 months at $21,000 per day, while Petro Barbero was said to have taken the 2007-built MR ‘Nave Equinox’ for 12 months at $11,750 per day.

 

In the S&P market, Indian-based AZA Shipping was reported as the buyer of the 2001-built Aframax ‘Thera’ for $16.5 mill, while the 2015-built MR ‘Amor’ was believed to have changed hands for $32.8 mill.