Freight rates for very large crude carriers (VLCCs) are set to hold around the current levels ahead of a possible bounce later this month on renewed crude buying from China, and more interest from charterers taking ships on short-term charter for floating storage, brokers said on Friday.
That came as VLCC rates from the Middle East recovered slightly on Thursday from a near two-month low hit on Wednesday.
“Rates are recovering to high 40s and touching 50s levels on the Worldscale measure,” said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.
“I wouldn’t be surprised if rates bounce back for July loading if the storage play gets traction and on new China crude import quotas,” he said. China is expected to finalise new import quotes by the end of this month.
Brokers said a combination of low oil prices and tanker charter rates had led to growing interest by charterers to fix older vessels on short-term charter of periods of between 45-180 days.
Around five or six charterers including Statoil and Lukoil were making inquiries about taking ships for floating storage, brokers said.
Current spot earnings on routes from the Middle East are around $11,000-$12,000 per day, brokers said. Breakeven levels for a 300,000 deadweight tonne VLCC are about $22,300 per day, according to leading tanker owner Frontline.
With such low rates, VLCC owners have started to slow down their ships when they return empty in an effort to save costs, a move that will increase the voyage duration and reduce number of ships available for charter, a European supertanker broker said on Friday.
“There is a big overhang of ships available, even into July,” the broker said.
That came as Frontline chief executive Robert Macleod said the current market of low rates would continue.
“We are now back at the levels we saw in Q3 of 2016. We expect the near-term pressure on crude tanker rates to continue, but believe that the market will ultimately return to balance probably in 2018,” he said in an analysts’ earnings call on May 30.
A seasonal improvement in the second half of 2017 can also be expected,” Macleod added.
VLCC rates on the Middle East-to-Japan route slipped to W49 on Thursday from around W49.50 a week earlier.
However, rates vary depending on where oil is unloaded, tanker age and availability.
“There is a very big spread of about 10 Worldscale points,” the European tanker broker said.
Rates on the West Africa-to-China route climbed to about W54.25 on Thursday against W52.50 a week earlier.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to around W101.25 on Thursday compared with around W102.50 last week.