VLCC market to pick up as holidays end

Recent holidays caused a slowdown in the volume of business concluded in the Very Large Crude Carrier (VLCC) sector and there may be signs that a recovery is in the pipeline.

There is evidence that the true cutback from members of the Organisation of Petroleum Exporting Countries (Opec) has only amounted to about 700,000 barrels per day instead of the 1.2 million bpd agreed upon. If there is further reluctance to stick to what was agreed, the 500,000 barrel cut agreed on from the February 1 will fall short, leading to an actual cut of less than one million bpd.

Opec estimates that non-Opec oil production will increase by 1.8 million bpd in 2007, leading to an overall increase in oil movements. This will come as a relief to shipowners, but not to oil producers. The price of oil is unlikely to rise towards $60 per barrel, but more likely to drop towards $50 per barrel. It is currently trading at $52 on the New York oil market.

But for now, as the amount of enquiry diminishes, owners feel obliged to take what is on offer. A single hull vessel fixed a voyage from the Gulf to Thailand at Worldscale 49.5 while a double-hull ship was fixed for a similar voyage at WS60. There is some evidence of owners digging their heels in at this sort of level and there are predictions that the market will not weaken much further.

Some brokers are reporting that a double-hull vessel has fixed to a Japanese charterer at WS70 but other reports suggest the market is less strong.

In West Africa, rates to the US Gulf have also eased back to below WS80 and will probably weaken further. Voyages from West Africa to India have been concluded at a lumpsum of about $3.25 million. With rates starting to level out and showing signs of strengthening in some areas, we may see a period of relative calm.

Suezmax

Suezmax rates are under pressure and are being supported by the delays in the Turkish Straits, now averaging 21 days. Tankers over 200 metres in length are banned from making transits in darkness, so until the number of daylight hours lengthen, there will be significant hindrances to trade.

Chevron fixed the Sea-prince for a voyage from the Black Sea at WS150 where last week, rates stood slightly higher. The Portuguese charterer's Saras fixed the Eco Europa for a short inter-Med voyage at WS120 where last week such a short trip would have attracted a rate 20 or 30 points higher.

There was not much activity in the Gulf with the Chinese reported to have fixed a single hull vessel at a weaker WS115 and West African voyages to the US have now fallen to WS130 from WS150 last week. There is a feeling of too many ships chasing too few cargoes, so rates will probably fall further.

Aframax

Surplus tonnage in the Gulf has caused rates East of Suez to fall back. Voyages for double hull tankers from the Gulf to the Far East ended the week at about WS140, while single-skin ships accepted a good deal less.

The last fixture was reportedly concluded at WS115 for Malaysian discharge. Rates in the Far East have fallen back to about WS35 for Indonesia/Japan or Australia movements.

A quiet period in the Caribbean saw rates weakening again as WS150 was reported for a Caribbean US Atlantic Coast voyage, down from WS200 or WS210 early in the week.

In the Mediterranean, there was considerable activity but not enough to soak up a build-up of tonnage and as a result rates quickly fell back from WS250 to WS230. As the week progressed, further falls were seen and Friday saw WS205 reported for a cross-Med movement. Owners should really be thankful for the Turkish Strait delays as one wonders where rates may have fallen without them.

In North West Europe, we have experienced yet another quiet week in the North Sea and in the Baltic. 80,000 tonnes was concluded for an Inter-UKCont voyage, but as the week progressed, rates were eroded down to WS 130. 100,000-tonne trips from the Baltic to UKCont paid about WS110. 80,000 North Sea to the USA has not really been tested, but probably would attract rates of about WS200 for 55,000 tonnes of cargo.

The writer is a shipbroker and marine consultant with over 40 years' experience in the tanker and dry cargo markets.