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VLCC tanker market could be headed for a slowdown - Affinity Research

Logistic News - Published on Thu, 08 Nov 2018

Image Source: Hellenic Shipping News
Mr Nikos Roussanoglou of Hellenic Shipping News Worldwide wrote, the VLCC tanker market has had a good run of late, but could be headed for a correction in the coming days. In its latest weekly report, Affinity Research said that “the rally of the VLCCs continued throughout this week as well, where TD3C and TD15 reached WS 100 and WS 95 respectively. This kind of levels have not been noted from January 2016. However, this is expected to be the peak of the market, as with nearly 8 offers coming out from the AG, the market will get calmer. Regarding Suezmaxes in West Africa, TD20 was assessed the same as the previous week, however sentiment is good due to the supply of the Carribean and the AG . Approximately 25m bbls are needed to be covered in the 3rd decade so done the market has potential as we move deeper into the month. What December will bring, will rely on the fate of the WTI/DME spread & impact of delays in the Far East & Turkish straits”.

Affinity added that “the situation is reversed on the Transatlantic, however. WTI/DME spread has been lingering around USD 7-8, while Worldwide oil prices have dropped off considerably, damaging Trader confidence and lessening the appetite for long haul voyages. The impact of this, has not being realised for the time being as delays on lightering tonnage maintain a short list of firm candidates. However, with Aframaxes having ballasted TA to replenish the fleet and because of lower demand for USG/EAST voyages, the Americas markets could well cool off in a couple of weeks’ time, despite heavy Venezuelan exports”.

In a separate note, Charles R. Weber said that “the VLCC market remained firm this week with rates extending gains on lagging sentiment amid sustained demand strength. Chartering demand in the Middle East slipped w/w from last week’s strong fixture tally but with charterers continuing to work second?decade November cargoes it became increasingly apparent that the November cargo program would exceed the historical peak observed during the October program. Meanwhile, demand in the West Africa market remained unchanged from last week’s strong pace with eight fixtures reported. Demand in the Atlantic Americas was improved on the reappearance of cargoes from the USG (including the first cargo bound for China since August), augmenting elevated ex? Brazil demand. October spot demand generation places Q4 on course further strong gains. Adjusted ton?miles, a proprietary measure we developed to factor for the implications of a wider geographic distribution of trades relative to historic norms, showed a 15% y/y expansion during Q3 and the October pace, if sustained through the remainder of the quarter, would yield an acceleration thereof to 24% y/y (12% q/q). This would undoubtedly place the VLCC market on course for a strong conclusion to 2018 and start to 2019. As the market progresses into 2019, expectations are tempered by 2019’s decades?high projected net fleet growth – with deliveries front?heavy during H1”, said CR Weber.

Meanwhile, in the Suezmax market, CR Weber said that “rates remained firm this week as fudnamentals remained tight. Fresh delays in the Turkish straits added to the headwinds, prompting rates on the BSEA? MED route to gain 10 points to conclude at ws115. In the West Africa market, rates firmed in tandem despite a slowing of fixture activity as stronger recent demand for VLCCs yielded lower cargo availability for the smaller size class. The regional Suezmax fixture tally dropped 47% w/w to a one?month low of nine. Rates on the WAFR?UKC route added 5 points to conclude at ws112.5. In the Atlantic Americas, Suezmax rates remained firm on high regional Aframax rates and freshly stronger regional VLCC rates. The USG?SPORE route added $200k to conclude at $4.50m lump sum. The CBS?USG route was steady at 150 x ws 125 and the USG?UKC route was unchanged at 130 x ws120. With Aframax rates retreating from recent highs, the relative $/mt premium for Suezmax units has expanded which may lead to some losses thereof during the upcoming week”, the shipbroker concluded.

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Posted By : Joykumar Irom on Thu, 08 Nov 2018
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