In what seems to be a rather established downward trend, VLCC rates
continued to slide this week as a pause between the conclusion of the
August and start of the September programs in the Middle East market saw
overall chartering activity levels decline, said shipbroker Charles R.
Weber.
According to the shipbroker, “the Middle East market yielded just 19
fixtures, representing a 32% w/w loss. Elsewhere, the West Africa market
was more active; seven fixtures materialized there, marking a 133% w/w
gain and the loftiest tally in more than a month. The August Middle East
program concluded slightly ahead of our previous estimate after a
number of late fixtures were reported; the month has now yielded 114
cargoes, six more than the tally as of a week ago. Together with four of
this week’s West Africa fixtures having been concluded on ballast units
from the Far East which would have been available for August loading in
the Middle East, the number of surplus September Middle East units has
trimmed significantly from 27 to 17 (albeit still the largest surplus
since September 2014)”.
Charles R. Weber noted that “despite this, sentiment remained sour on
the generally slow pace in the Middle East market and a wider
supply/demand imbalance in the Middle East at the start of the September
program than has been observed since October 2014. The emergence of the
Basrah schedule added additional pessimism to near-term sentiment.
Despite showing a 290,000 b/d supply increase, much of the increase is
comprised of Suezmax-sized stems and only one additional VLCC-sized stem
compared with August. Moreover, just one VLCC stem is noted for loading
during the first decade of September, implying a delaying of absorption
of the August surplus units”.
The shipbroker added that “simultaneously, uncertainty surrounds the
Saudi program and though a record production rate during June was
reported this week, the short August program does imply some pullback.
Assuming that the short August Middle East program was merely a blip
in-line with a similar temporary pullback observed during September 2014
(when oil prices commenced their surplus supply-driven tumble), there
are reasons to believe that by the end of the September Middle East
program supply/demand fundamentals will be more closely aligned to
support a directional rebound through Q4. Contributing further to this
expectation is this week’s news that Angola will boost its crude exports
during October to a four-year high with Asia the likely destination of
the increase”.
CR Weber also mentioned that “as West Africa cargoes are worked in
advance of those in the Middle East, any corresponding increase in VLCC
demand in the region – and a corresponding draw on Middle East positions
– to service October cargoes should occur around the time that Middle
East charterers move into the second-decade of the September program
there. The coinciding of stronger demand in both markets at that time
will likely lead to a reversal of sentiment and support fresh rate
gains. In the interim, however, rates appear likely to remain modestly
soft. Middle East Rates to the Far East fell 9.3 points w/w to an
average of ws33.3 while the closing assessment stands at ws30.
Corresponding TCEs were off by 30% to an average of ~$27,863/day while
the present assessment yields ~$23,736/day – a fresh YTD low. Rates to
the USG via the Cape were assessed at an average of ws23.1, off by 1.8
points from last week’s assessed average. Triangulated Westbound trade
earnings fell 4% w/w to an average of ~$58,478/day. Atlantic Basin Rates
on the WAFR-FEAST routes shed 6.9 points w/w to conclude at an average
of ws45.1. Corresponding TCEs were off by 17% to an average of
~$41,468/day. IN the Caribbean market, rates were softer on the back of
generally sour sentiment in the wider VLCC market. Regional
supply/demand fundamentals remain unchanged; however, units freeing in
the Red Sea are now looking at ex?Caribbean business, which boosts the
effective supply. The CBS-SPORE route fell by $100k to a closing
assessment of $5.9m and remains under modest negative pressure”, CR
Weber concluded.
Suezmax
Meanwhile, in the Suezmax market, “chartering demand in the West
Africa Suezmax market trimmed modestly with 21 fresh fixtures
representing a 4.5% w/w reduction. A low Brent premium to Dubai
benchmarks has helped to support Asian demand, though corresponding
support for VLCC demand in the region from Asian buyers during the
September program has been largely kept in check due to high crude and
product inventories and more extensive seasonal maintenance. As a
result, the spread between West Africa cargoes between VLCCs and
Suezmaxes during the September program has thus far been largely
unchanged from August (thus far). While this has implied stronger
Suezmax demand and weaker VLCC demand (as compared with the first seven
months of 2015), Suezmax rates have remained weak. The WAFR-USAC and
WAFR? UKC routes shed 5 points and 2.5 points, respectively, to ws65 and
ws67.5. A seasonal pullback in Aframax demand has reduced rates for
both Aframaxes and Suezmaxes in turn (given the larger class’ ability to
compete when Aframax markets are tight). Late purchases of September
West Africa cargoes could offer support to Suezmaxes depending on the
extent thereof; otherwise rates appear likely to be around a near-term
floor”, CR Weber concluded.
Aframax
Finally, “the Caribbean Aframax market remained soft this week on the
back of continued subdued activity with the weekly fixture tally easing
17% w/w to a total of 10. Rates remained soft throughout the week with
the CBS-USG route ultimately losing 2.5 points to conclude at an
assessed ws80. A late week fixture at ws90 was reported, though this
fixture required high heating and had max-DWT restrictions; as such this
fixture is not entirely reflective of market fundamentals. Owners will
likely try to capitalize on the high last-done rate at the start of the
upcoming week though these attempts will be complicated by the ongoing
availability of prompt tonnage. As such, failing an early-week demand
surge, rates appear set to remain soft”, CR Weber concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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