Tanker market hits a lull amid warm winter and falling prices

According to the Oil and Gas Journal, a UK consulting firm has predicted that Opec crude exports will increase by 270,000 barrels per day by February 10, despite its pledge to cut production by an additional 500,000 bpd from Thursday.

In addition many analysts believe, according to the journal, that Opec has so far only accomplished a part of the 1.2 million barrels per day (bpd) cuts which were meant to have come into force from Nov-ember 1.

News from the US following the president's State of the Union address to double the strategic petroleum reserve (SPR), was that oil prices had risen sharply. Now they have fallen back again, adding to the suspicion that the Opec cuts are not working.

Track record

The crude oil stock build for the SPR is due to start with a 100,000 bpd refill of existing inventories to a capacity of 727 million barrels. Thereafter the build will increase to a total of 1.5 billion barrels by 2027.

In the same speech the president pledged to reduce gasoline consumption by 20 per cent in ten years. This was met with some scepticism by many observers, mindful of the fact that the US has increased its gasoline consumption by 15 per cent over the last ten years.

Its track record is therefore pretty rocky especially as there are limitations on future domestic ethanol production. It is like the alcoholic who says, "I'm not drinking any more." Then under his breath he whispers, "But I'm not drinking any less."

The US DoE figures show average weekly crude oil imports in mid-January stood at 4 per cent higher compared with the same period last year.

But this has little effect on the tanker market which is drifting along with VLCCs from the Arabian Gulf to the West at Worldscale 55. This equates to $42,000 per day, boosted somewhat by lower bunker prices currently being quoted.

Suezmax rates bucked the trend in the benchmark West African trade. Rates went slightly firmer with West Africa to the US Gulf cargo movements up about 30 points to WS135, despite attacks on oil interests in Nigeria which reduced export volumes.

For products, the high-volume trans-Atlantic trade further softened with rates down 20 points to WS205. This was as a result of firm and rising US product stocks, in particular gasoline. Official US figures show imports for mid-January are slightly lower in comparison with the same period last year while production is about 6 per cent higher, much of this rise as a consequence of the hurricane damage in late 2005.

Cold weather is now forecast in the US, especially in the Eastern half for the first half of February. Traders are therefore expecting an increase in imports and thus a firming of the cross-Atlantic and Caribbean/USA rates.

In the Caribbean, the fall in US fuel oil imports over this year's mild winter weather has had a direct impact on the chartering of medium size tankers and the Panamax sector in particular.

Rates for 50,000 tonne cargoes from the Carib-bean to the US are now trading between WS160 and WS170, almost half the levels seen in mid-December when fog delayed Gulf of Mexico imports and the tonnage supply dried up.

For European markets, winter has arrived in full and continues to influence tanker trades in the Black Sea and the Med and conditions in the Turkish Straits still cause delays of more then three weeks on the round voyage.

Clean movements

With these delays through the Bosporus there are reports that some traders are seeking sub-Aframax cargoes of 40,000 tonnes, so as to transit the heavily restricted Turkish Straits that much quicker.

Despite the adverse conditions, there has been some softening in freight rates for both Suezmax and Aframax tonnage. Brokers report fixtures at Ws165 for 80,000 East Mediterranean to Euromed cargo movements.

In the Asian sector, rates were generally steady after a spate of fixtures in mid-January. But the forecast trend suggests a slowdown in loadings and deliveries by Chinese oil companies anticipating the Lunar New Year holidays.

Fixtures for 260,000 tonnes from the Gulf to Japan were reported at WS62 or about $40,000 per day by the end of last week. This marks a fall from the WS80 seen on double-hulled VLCCs just a couple of weeks ago.

Clean movements in Southeast Asia also became weaker again last week with tonnage lists becoming longer. Rates for a 30,000 tonnes parcel from Singapore to Japan were down by about 25 points to WS225.

And for the larger product carriers from the Gulf to Japan, rates for 55,000 tonnes on LR1 vessels were down 25 points to WS150.

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