VLCC Markets - Owners in the driving seat

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Extensive holidays in the east were barely noticed as VLCC activity was reported as high.

Continued demand for all the major routes propelled the already firm market still further, Fearnleys said in its weekly report.

 

Charterers went out further on dates to have more ship choices and owners optimism rose together with rates.

 

Earnings from MEG and WAfrica/East were around $20,000 per day with owners aiming to push rates higher into the winter.

 

The WAfrican Suezmax market softened over the past week with third decade dates only infrequently quoted, causing rates to erode gradually and settle at the WS72.5 level.

 

Meanwhile, the main focus has been on the Black Sea and Med where an Aframax shortage in the 3rd decade has spilled over onto the Suezmaxes, which have been soaking up the part cargoes at premium rates. Foe example, TD6 is currently at WS87.5.

 

As a result, this has thinned the Suezmax list thus creating a firmer trend. Naturally, this has ignited owners bullish sentiment and with early November WAfrican dates due to show imminently, owners know there is potential momentum as cargo volumes set to increase and they will look to capitalise accordingly.

 

North Sea and Baltic Aframaxes experienced an upturn in rates on the back of more ships leaving the area and thus not re-appearing in a normal fixing position for the current window. A busier programme for the 3rd decade, coupled with bad weather in the North Sea, is also filling owners with more confidence.

 

Moving forwards towards the end of the month, we expect rates to climb further, Fearnleys said.

 

The winner of last week’s Mexican standoff was everyone having tonnage in the Med and Black Sea. A heavy 3rd decade programme out of the Black Sea, combined with less tonnage and determined owners, drove rates up by 10 points.

 

As a consequence, the above mentioned Suezmaxes came into play. We are currently at WS150 ex Black Sea and we are waiting to see the outcome of Petrogal’s long cross-Med cargoes with both Suezmaxes and Aframaxes quoting WS160 and upward.

 

Going forward, we expect more activity ex Libya and the last couple of cargoes out of the Black Sea for 3rd decade, so this market will not soften anytime soon, Fearnleys concluded.

 

Looking at the Asian product tanker market, while growth in the product tanker fleet has been fairly moderate this year, compared to the crude tanker segment, overcapacity has weighed on clean tanker freight rates in Asia over the year, Ocean Freight Exchange (OFE) said in its weekly report.  

 

Fleet growth for LRs and MRs hit around 6% and 3%, respectively, thus far this year. The pace of newbuilding deliveries is expected to ease in the fourth quarter, due to high slippage rates.

 

A series of unplanned refinery outages in the West provided some respite for LR owners in the third quarter, most notably Hurricane ‘Harvey’, which took out nearly 25% of US Gulf Coast refining capacity.

 

The subsequent redrawing of trade patterns boosted tonne/mile demand significantly, as more LR tankers were chartered to move middle distillates from Asia/AG to Europe following the open East-West arb, which had been shut for most of the year.

 

As a result, LR freight rates rebounded from their sluggishness to hit the year’s high at WS145 for TC1 and WS152.5 for TC5 on the back of tight tonnage until the second half of October, OFE said.

 

Rates are currently softening, as these vessels return from their long-haul voyages, lengthening the position list in Asia/AG again. While there is some near-term downside, OFE expected to see a surge in LR rates towards the end of the year, due to robust demand-side factors.

 

Naphtha demand in Asia typically sees a seasonal boost in fourth quarter, due to higher LPG prices, which makes it less competitive, as well as the end of cracker turnaround season. Winter heating demand for LPG renders the fuel too expensive to be used as a petchem feedstock, with propane trading at a $76.25 per tonne premium to naphtha as of 11th October.

 

As such, higher naphtha imports into Asia in the fourth quarter are expected to underpin LR tanker demand and subsequently freight rates.

 

With the East/West gasoil EFS widening to more than -$25 per tonne on 10th October, the arb remained open. Middle distillate flows from Asia/AG to Europe are expected to remain elevated in the short run, lending support to LR tanker demand.

 

The trading play in the Asian gasoil market last month led to Winson Oil taking at least seven LR2s for gasoil storage around Singapore ranging from 30 to 90 days. This helped to tighten the prompt supply of ships, putting a floor under LR tanker rates.

 

The effects of ‘Harvey’ also reverberated through the MR segment with a surge in MR vessels taken for long-haul voyages from Asia to the US and Latin America.

 

Similar to the LRs, the return of these ships has lengthened the position list in Asia once more and led to a moderation in MR rates.

 

Tighter quotas are expected to cap Chinese exports in fourth quarter, weighing on MR demand and freight rates. In a bid to curb pollution, the recently-released fourth batch of Chinese fuel export quotas (under both processing trade and general trade terms) stands at 5 mill tonnes, 67.4% lower than the previous batch.

 

This brought the year’s total amount of quotas to 37.4 mill tonnes, 19% lower than that of 2016. As such, any seasonal spike in MR rates is likely to be fairly muted, compared to previous years, OFE concluded.

 

Elsewhere, d’Amico Tankers signed its second memorandum of agreement in recent weeks.

 

This time it was for the sale of the 2006-built MR ‘High Prosperity’ for $14.245 mill.

 

This transaction will generate a positive net cash effect of around $6.9 mill for d’Amico Tankers, contributing to the liquidity required to complete DIS’ fleet renewal programme, the company said.

 

In addition, d’Amico Tankers will retain the commercial control of the vessel, having also agreed a six-year timecharter with the buyer at a competitive rate.

 

In the charter market, brokers reported several fixtures, including the 2005-built MR ‘Helen M’, which was reportedly relet from RS Shipping for about 60 to 90 days by Koch at $17,000 per day. She was originally fixed to RS Shipping for 12 months at an undisclosed rate.

 

Laurin was reported to have taken a 2002-built MR for six months, option six months at $11,250 per day, while Clearlake was said to have fixed the 2011-built ‘Vinjerac’ for between 30 and 120 days at $12,750 per day.

 

Another MR, the 1996-built ‘Dawn Madurai’ was said to have been taken by IOC for 12 months at $12,750 per day.

 

The 2014-built VLCC ‘Miltiadis Junior’ was thought fixed to new Iraqi venture Al Iraqia for five years at $22,750 per day and LMCS was thought to have fixed the 2001-built Suezmax ‘DS Symphony’ for 12 months at $15,000 per day.

 

Chevron was believed to have taken the 2008-built Aframax ‘Atlantic Explorer’ for 12 months at $14,250 per day, while ST Shipping was said to have fixed the 2003-built Aframax ‘Al Mahfoza’ for six months at $14,000 perday. 

 

A measure of the Jones Act was illustrated by the reported fixture of the US flag 2010-built MR ‘Lone Star State’ to Military Sealift Command for 12 months at $83,836 per day.

 

In the S&P sector, Trafigura was said to have purchased the 2000-built Suezmax ‘Gener8 Argus’ for $11 mil, while the 2002-built Aframax ‘BLS Advance was reported as committed to Avin International for $7.8 mill.

 

Ardmore was also believed to have purchased the 2012-built MR ‘Challenge Pearl’ for $16.5 mill.

 

Three Handies were reported to have changed hands. Greek interests were said to have taken the 2003-built ‘Vardar’ for $9 mill, while West African interests were thought to be behind the purchase of the 2002-built ‘Maersk Ellen’ for $9.5 mill. She was said to have recently passed her special survey.

 

In addition, undisclosed purchasers were thought to have taken the 2002-built ‘Seaways Ambermar’ for a price quoted to be in the mid-$9 mill mark.