Asia Tankers-Mideast VLCC rates set to fall

SINGAPORE / Reuters

Freight rates for very large crude carriers (VLCCs) on Asian routes from the Middle East could fall to a new low for the year next week as too many ships chase the number of available cargoes, ship brokers said on Friday. That came as average rates from the Middle East to Asia have fallen close to last year’s low. Average rates dropped to around 32.50 on the Worldscale measure on Sept. 23, 2016, equivalent to about 42.75 this year after Worldscale rates were recalculated for 2017.
“On Thursday, rates were W46.25 – that is near the bottom on last year,” a Singapore supertanker broker said on Friday. “We’re about to smash that,” he added. While charterers fixed ships at around W38 to W39 on Thursday, these were deals for VLCCs handicapped by their age. Older vessels are generally fixed at lower rates than modern tankers.
Taiwanese refiner CPC Corp is currently inviting offers for VLCC charters and brokers anticipate vessels will be fixed at rates below W40. “The tonnage list (of available ships) is still against owners,” the Singapore broker said.But rates from West Africa are set to remain relatively buoyant at around 50 on the Worldscale measure, opening up a two-tier market, brokers said. “Charterers vetting procedures mean the West Africa market is one exclusively for owners of modern tonnage. Owners know the competition so they can play the market which supports freight rates,” a European supertanker broker said on Friday.
Overall, the VLCC market “has gone from bad to worse. Rates are still heading down,” the broker said. “The tanker position list is way too long – owners are chasing every cargo,” he added. Brokers see no recovery in supertanker rates until September or October when oil demand picks up ahead of winter in the northern hemisphere.That came as energy consultant Douglas Westwood said crude oil oversupply would return next year and continue to at least 2021. That was due to the start-up of fields and new production coming to the market which was sanctioned before the downturn, said Steve Robertson, head of research, global oilfield services at Westwood Global Energy Group in a report on Thursday.