Freight rates for very large crude carriers (VLCCs) face an uncertain week, possibly coming under pressure from a dearth of new Middle East cargoes but they could also find support from geopolitical tensions over Qatar, brokers said.
There is also continuing unpredictability over whether tankers could co-load Qatari crude with other grades and the impact on future trading activities if tankers did load Qatar crude.
“No one is really sure what is going on. Everyone is waiting to see what might happen,” a Singapore-based supertanker broker said on Friday.
“There is a lot of Qatar chatter-chatter but it is not related to anything that’s happening in the tanker market,” the broker said.
While forward VLCC rates initially rose to a high of around 55 points on the Worldscale measure earlier this week they have since slipped slightly.
“The Qatar situation has not been as monumental or market shifting as people hoped. It’s all a bit dull. I’m quite bearish on the VLCC market – I do see VLCC rates fading,” the Singapore broker added.
There had been market speculation Saudi Arabia and other countries could boycott tankers in the future that load Qatari crude, similar to the situation facing owners that transport Iranian crude. But that has yet to happen, and if it did, Iraqi exports, among others, would remain available, brokers said.
Port authorities in the region have also flip-flopped this week on whether tankers can load crude from places such as the United Arab Emirates if they are also loading Qatari crude although there now appears to be a general ban by Saudi Arabia, the UAE and other countries on co-loading Qatari crude.
The ban on co-loading has seen charterers splitting VLCC cargoes into two Suezmax cargoes – a VLCC can typically carry 2 million barrels and a Suezmax 1 million barrels. French oil major Total took two Suezmax tankers, one to load UAE crude and the other, paying a premium to load Qatari crude, brokers said.
The shift to smaller sized tankers like Suezmax and Aframax vessels could buoy the Suezmax market, said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore.
Steady cargo volumes from West Africa for July loading was providing “buoyancy” to VLCC rates, Sharma said.
“July liftings haven’t got underway in the Middle East,” Sharma added. Owners would have to wait until the week after next before charterers began to fix ships to load Middle East cargoes in the first 10 days of July. “The market is having to wait and watch next week – like a slack tide,” Sharma said.
“I expect rates in July to be slightly better. There could be an increase in rates. There is still potential for that,” Sharma added.
VLCC rates on the Middle East-to-Japan route rose to W51 on Thursday from around W49 a week earlier.
Rates on the West Africa-to-China route rose to W55.75 to about on Thursday against W54.25 a week earlier.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia rose to around W102.25 on Thursday compared with around W101.25 last week.