The VLCC route from West Africa to China, basis 260,000 mt, was assessed at $8.08/mt on Wednesday, the lowest since September 3, 2003, when it was assessed at $7.80/mt, S&P Global Platts data showed.
One of the root causes for such low freight rates has been the extraordinary growth in the VLCC fleet in the past two years along with the order book, which makes up 15% of the current fleet.
The age profile of the fleet reflects the volume of new-builds. The average age in the VLCC sector is 9.5 years, the youngest of all the dirty tanker sectors, according to Affinity Tankers data.
“[Weak] earnings are all over the VLCC market. It is time for the scrapyards to work at full capacity, so let us see,” a shipowner said.
OPEC and non-OPEC cuts have also reduced global oil supplies in the active VLCC markets in the Persian Gulf and West Africa, reducing the volume of cargoes being exported.
The Persian Gulf market is the largest by volume. As exports have decreased there pulling down freight rates, that has put pressure on other loading regions.
One of the biggest VLCC loading points in West Africa is Angola and a steady fall in its oil production due to mature fields and the OPEC cuts has resulted in fewer cargo loadings.
Angolan grades see the highest exports east, especially to China which remains its biggest customer.
Angola exported an average 1,632,766 b/d in 2017, a fall of 6% and 8% from 2016 and 2015 respectively, according to ministry of finance data.
The fall in exports in the past year reflected Angolan oil production, owing to declining fields, technical and operational issues, especially at its offshore fields, as well as a lack of upstream investment.
Angolan exports were looking even lower this year, with crude oil exports expected to average 1.54 million b/d for the first four months of the year, according to Platts estimates.