Asia Tankers-VLCC Rate Direction Uncertain

Posted by Joseph Keefe April 1, 2016

MidEast VLCC rates rise by more than $24,000 per day; China and Saudi Arabia fuel chartering surge.

Freight rates for very large crude carriers (VLCCs), which hit a two-week high on Thursday, face an uncertain direction next week, brokers said.

Port delays could help create a shortage of tonnage that could push rates higher, but charterers may cool fixture activity to put a ceiling on rates.

"It's difficult to call which way the market is going to go," a Singapore-based supertanker broker said.

"Earlier this week I thought the market was getting toppy and expected charterers to go back into their shells. But that didn't happen," the broker said.

"Middle East rates are probably 90 now," on the Worldscale measure, the broker said.

That came as VLCC charter rates for a voyage from the Middle East to Asia climbed by more than $24,000 per day since last Thursday, shipping data tracked by Reuters showed.

But, Indian charterers have chartered six smaller and cheaper Suezmax tankers rather than fix three VLCCs, brokers said.

"This could signal charterers have called time on the bull run on VLCC rates," said a European-based VLCC broker.

Rates rose after a surge in chartering activity by Saudi Arabia's Bahri and Chinese traders, including Unipec and Glasford.

Unipec has chartered around 20 VLCCs on the open market since March 24, while Bahri fixed about seven supertankers, Reuters data showed.

The fixture flurry has been fuelled by charterers anxious to book vessels amid bad weather and port delays that have disrupted vessel itineraries, brokers said.

"The extensive delays in Chinese ports in particular pushed charterers over the Easter holidays to secure tonnage with secure itineraries," Norwegian ship broker Fearnley said in a note on Wednesday.

The surge in Middle East rates has spilled over to support supertanker freight rates from West Africa to Asia.

Strong demand by China for West African crude have boosted rates in the region.

April loadings for shipments from West Africa to Asia are set to hit more than 2 million barrels per day (bpd), the highest since July 2015.

VLCC rates from the Middle East to Japan climbed to around W87.50 on Thursday, up from W63.75 a week earlier and the highest since March 16.

Supertanker rates from West Africa to China rose to about W82.50 on Thursday, their highest since March 16, from about W67.50 last Thursday.

Rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to around W125.25 on Thursday from W152.

Clean tanker rates from Singapore to Japan were around W148.50, compared with about W150.25 a week earlier.