Freight rates for very large crude carriers (VLCCs) on Asian routes may have found a floor this week as a combination of increased chartering activity and some tankers sailing at slower speeds pushed rates slightly higher from the Middle East.
“Rates are at a bottom, they have kind of found a floor,” said Ashok Sharma, managing director of BRS Baxi Far East in Singapore, on Friday. “But the recovery is a very shallow one – the market is really rubbish,” he added.
Charter rates from the Middle East to Asia gained about 3 Worldscale points on the week to Thursday equivalent to an extra $3,500 in daily earnings. The majority of deals was done secretively and off the open market, Norwegian shipbroker Fearnley said.
“A sudden burst of activity in the Asian VLCC market this week gave owners an opportunity to secure slightly higher rates,” said Rachel Yew, commodity and freight analyst at Singapore’s Oceanfreightexchange.
“The number of fixtures from the Middle East recorded this week was more than double than that of last week,” Yew said in a note on Friday.
“Any potential impact of weather delays in the Atlantic due to a series of hurricanes has been offset by low cargo demand,” she added.
Rates are likely to continue to stay around current levels probably for another month until charterers fix cargoes ahead of the peak winter season in the northern hemisphere, brokers said.
“The market will continue to move sideways for a while – it will be a month before there is a real increase in activity,” a European supertanker broker said on Friday.
Some owners have started to sail at slower speeds to reduce fuel costs in a move that will lengthen sailing times while cutting the number of ships available for charter.
“It is really a mixed bag,” said the European supertanker broker. “Some owners are sailing at 8-9 knots, some at 11, while others are still sailing empty at 13 knots,” the broker added.
With crude prices in backwardation – meaning current prices are higher than in future months – there is no arbitrage market for oil shipments from the West to Asia.
Caribbean exports, which had helped support VLCC rates in the last two weeks, have eased with VLCC hire rates falling to around $2.7 million from more than $3 million for a voyage to Asia in late August.
“It’s no longer viable for ships to sail empty from Asia to pick up a Caribbean cargo,” Sharma said.
VLCC rates on the Middle East-to-Japan route climbed to around W40.75 on Thursday from W38.75 last week.
Rates on the West Africa-to-China route rose to W49.50 on Thursday from W46.75 last week.
Charter rates for an 80,000-deadweight-tonne Aframax tanker from Southeast Asia to East Coast Australia were at W87.50 on Thursday, unchanged from a week ago.