Gulf tanker rates under pressure

Oil prices continue to head downward despite cuts in Opec output. This was not the intention. But after the unilateral declaration by Nigeria and Venezuela that they would make cuts based on their official quotas, there was a certain amount of turmoil in the market.

Nigeria has been under-producing by about 120,000 barrels per day for a long time now. Similarly, reports suggest that Venezuela is also under-producing by about 680,000 bpd.

The calculated Opec reduction is therefore not 1.2 million bpd but, according to the Oil & Gas Journal last week, only 765,000 bpd.

Opec's decision to meet in December to discuss a further cut of half a million barrels is an admission that the initial cut might not work. With oil prices not increasing and oil production not decreasing to the extent that the oil producers planned, it is small wonder that the tanker market is only easing back slightly and then only in selected areas.

In the VLCC sector, Vela is reported to have fixed the Titan Glory for 280,000 tonnes from Saudi Arabia to the US Gulf at Worldscale 70. Some brokers are suggesting that the market is struggling to maintain this level but Valero took the Younara Glory for a 275,000-tonne cargo to the West at a similar rate.

The fact that the cargo sizes from the Gulf are the normal 275,000 to 280,000 tonnes rather than smaller sizes point to the numbers of cargoes being reduced to comply with the cuts, rather than a reduction in individual cargo quantities.

Although rates are struggling in the Gulf, West Africa is still firming. Current levels for VLCCs from Nigeria to the US are approaching WS110. Shell concluded the 2000-built Eli Maersk from West Africa to Loop at WS106.25. To the East, rates of WS87.5 are being seen, although CPC negotiated the 2000-built Worldwide tanker Ubud at WS83.5 for a voyage to Taiwan.

In the Suezmax sector, greater demand from the US, whose refineries are girding their loins for the cold weather, is also firming the million-barrel market. After falling to WS130 last week, rates rose to WS165 before dropping back to WS145.

The latest fixture reported from West Africa to the US was an alliance vessel. It was fixed by Conoco at WS145.

In the Black Sea, brokers report that crude exports from Supsa are liable to be affected in November. Problems with a pipeline feeding the terminal could leave owners facing severe delays.

In the Aframax sector, rates in northwest Europe drifted down from above WS200 to WS190 as supplies from the Norwegian sector were cut back. In the Med, rates remained high. The 2003-built Desh Bhakt was fixed for a voyage from Sidi Kerir to Falconara at WS217.5.

As if to underline increased US demand, the Caribbean crude market rose sharply from W235 to WS280. It fell back slightly last week: the 2005-built SCF Baltica was fixed by Valero for a Caribbean/US Atlantic trip at WS265.

Elsewhere brokers report that quiet trading conditions persist in the east and the current rate for an Indonesia to Japan Aframax movement has eased back to WS170.

In the clean sector, the US Department of Energy reported that weekly gasoline imports into the US fell to 676,000 barrels per day in mid-October, the lowest level for nearly a year.

With such a low demand, rates for a traditional 37,000-tonne clean cargo are steady at WS235. 38,000-tonne clean cargoes from the Caribs to the US Gulf are attracting levels of about WS200 to WS205, not much changed from last week.

East of Suez, rates for 55,000-tonne cargoes from the Gulf to the East fell to a six-month low of WS175.

The writer is a shipbroker and marine consultant with more than 40 years in the tanker and dry cargo markets.