Crude oil tanker earnings on the key Middle East route fell to their lowest in two months on Monday as growing vessel availability, slower demand and the end of a recent rally took their toll on sentiment.
Black Sea crude rates for suezmax tankers remained supported due to weather-related delays in the Turkish Straits.
The world’s benchmark Very Large Crude Carrier (VLCC) export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP dropped to W57.78 or $15,358 day, from W71.65 or $30,503 a day last week and earnings were at their lowest since Oct. 28.
“With the rush to cover early December cargoes coming to an end, limited enquiry and ample tonnage for second decade dates saw the MEG VLCC market soften last week,” broker SSY said.
“At this level, charterers may increase activity in the forthcoming days, but with tonnage abundant, rates could struggle to make any significant gains.”
Average VLCC rates hit their highest in over four months on Nov. 2 at $42,517 a day, helped by a flurry of fixtures from Chinese crude oil buyers in particular.
“The December program is sluggish,” Dahlman Rose & Co said. “Thus far, between 40 and 45 VLCCs have been fixed for loading in the Arabian Gulf in December.”
VLCC rates plunged in October as the end of a speculative trading play, which at one point last year involved an estimated 100 million barrels of crude oil held on tankers at sea, meant the market was awash with tankers.
Average VLCC earnings slid to a one-year low last month of $1,661 a day due to heavy oversupply, below the operating cost level of $10,000 a day.
Dahlman Rose & Co said the fourth-quarter earnings season was likely to be weaker than the previous quarter.
“As the December program plays out disappointingly, it appears that the 4Q10 period is likely to yield a similar outcome with even weaker results,” it said.
“In the near term, the tanker market may continue to experience intermittent softness. However, de-stocking trends should ultimately play out to the positive.”
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W38.75 on Monday, from W43.41 last week. VLCC rates from West Africa to the U.S. Gulf were at W67.43 from W77.32 last week.
Rates for suezmax tankers on the Black Sea to Med route rose to W126.50 or $40,155 a day from W121.54 or $36,557 a day last week.
“Delays have increased and some charterers have been forced to pay up for sensitive dates,” P.F. Bassoe said referring to suezmaxes.
In previous years, winter weather has regularly shut the Bosphorus and Dardanelle shipping lanes, suspending for days at a time the only navigable waterway linking Russia’s vital Black Sea oil ports to the wider world. There have been growing delays in recent days due to heavy fog.
“There is no doubt that rates have firmed and delays for Dardanelles/Bosphorus transits have increased,” broker E.A. Gibson said.
Cross Mediterranean aframax tanker rates were at W97.21 or $6,912 a day on Monday, from W100.63 or $8,038 a day last week.
Aframax tankers, which can carry up to 700,000 barrels of crude oil, in particular normally transport crude oil through the Black Sea to the Mediterranean. Larger suezmax tankers, which can carry up to 1 million barrels of crude oil, are also used on this route.
Black Sea crude rates for suezmax tankers remained supported due to weather-related delays in the Turkish Straits.
The world’s benchmark Very Large Crude Carrier (VLCC) export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP dropped to W57.78 or $15,358 day, from W71.65 or $30,503 a day last week and earnings were at their lowest since Oct. 28.
“With the rush to cover early December cargoes coming to an end, limited enquiry and ample tonnage for second decade dates saw the MEG VLCC market soften last week,” broker SSY said.
“At this level, charterers may increase activity in the forthcoming days, but with tonnage abundant, rates could struggle to make any significant gains.”
Average VLCC rates hit their highest in over four months on Nov. 2 at $42,517 a day, helped by a flurry of fixtures from Chinese crude oil buyers in particular.
“The December program is sluggish,” Dahlman Rose & Co said. “Thus far, between 40 and 45 VLCCs have been fixed for loading in the Arabian Gulf in December.”
VLCC rates plunged in October as the end of a speculative trading play, which at one point last year involved an estimated 100 million barrels of crude oil held on tankers at sea, meant the market was awash with tankers.
Average VLCC earnings slid to a one-year low last month of $1,661 a day due to heavy oversupply, below the operating cost level of $10,000 a day.
Dahlman Rose & Co said the fourth-quarter earnings season was likely to be weaker than the previous quarter.
“As the December program plays out disappointingly, it appears that the 4Q10 period is likely to yield a similar outcome with even weaker results,” it said.
“In the near term, the tanker market may continue to experience intermittent softness. However, de-stocking trends should ultimately play out to the positive.”
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W38.75 on Monday, from W43.41 last week. VLCC rates from West Africa to the U.S. Gulf were at W67.43 from W77.32 last week.
Rates for suezmax tankers on the Black Sea to Med route rose to W126.50 or $40,155 a day from W121.54 or $36,557 a day last week.
“Delays have increased and some charterers have been forced to pay up for sensitive dates,” P.F. Bassoe said referring to suezmaxes.
In previous years, winter weather has regularly shut the Bosphorus and Dardanelle shipping lanes, suspending for days at a time the only navigable waterway linking Russia’s vital Black Sea oil ports to the wider world. There have been growing delays in recent days due to heavy fog.
“There is no doubt that rates have firmed and delays for Dardanelles/Bosphorus transits have increased,” broker E.A. Gibson said.
Cross Mediterranean aframax tanker rates were at W97.21 or $6,912 a day on Monday, from W100.63 or $8,038 a day last week.
Aframax tankers, which can carry up to 700,000 barrels of crude oil, in particular normally transport crude oil through the Black Sea to the Mediterranean. Larger suezmax tankers, which can carry up to 1 million barrels of crude oil, are also used on this route.