Asia Tankers-VLCC Rates Steady as Suezmax Fixtures Weigh

Posted by Joseph Keefe August 12, 2016

Charterers splitting VLCC cargoes into smaller Suezmax tankers; rates to remain around $24,000 per day, below break-even levels.

Freight rates for very large crude carriers (VLCCs) on main routes to Asia are set to hold around current levels next week, as an oversupply of smaller Suezmax tankers put rates for larger VLCCs under pressure, ship brokers said on Friday.

That came as at least one charterer split a crude cargo that would normally be transported by a VLCC into two Suezmax cargoes.

Petroineos chartered two Suezmaxes to carry 130,000 tonnes of crude each from West Africa to China at the same rate as a VLCC, a European-based supertanker broker said on Friday. A VLCC can carry around 270,000 tonnes of oil.

"If charterers are splitting cargoes onto Suezmaxes then VLCC rates are not going anywhere," the broker said.

As a result, VLCC charter rates from the Middle East to Asia are likely to stay between 36 and 40 on the Worldscale measure, which are equivalent to daily earnings of $20,000-$24,000, according to data on the Reuters terminal.

That is way below break-even levels of around $30,000 per day, ship brokers said.

"I think rates will be more like in the mid-30s next week at least. I feel rates will hold steady as the September cargoes will start to come. I don't think we will see fireworks, sad to say," a Singapore-based supertanker broker said on Friday.

Shipbrokers recorded about 127-130 VLCC cargoes for August-loading in the Middle East, which was about 10-15 more cargoes than expectations, including more than 40 for loading in the final 10 days of August, according to data on the Eikon terminal.

But the number of VLCC cargoes is expected to slip in September as Asian refineries cut output in October because of maintenance.

"I don't see the VLCC market going anywhere," the European broker said.

That came as China's implied oil demand in July fell 0.1 percent from a year ago to 10.11 million barrels per day, the lowest since August 2014, reflecting the impact from summer floods and an emerging oil product glut, official data showed on Friday.

VLCC rates from the Middle East to Japan rose to W36.50 on Thursday, the highest since July 27, from W32.50 last Thursday, the lowest since Sept. 1, 2015.

Charter rates for VLCCs from West Africa to China climbed to around W41.25 on Thursday from W39.75 a week ago.

Rates for an 80,000 deadweight tonne Aframax tanker from Southeast Asia to East Coast Australia dived to W72.50 on Thursday from W76 the same day last week, the lowest since June 19, 2013, on fewer cargoes, brokers said.