Warm winter in the north hits tanker demand

Oil prices remain under pressure due to a mild winter in the northern hemisphere aided by El Nino. This has slowed down the rate of oil and product imports into the US.

Most dual-fuel power stations are currently preferring to use natural gas rather than heating oil, thus pushing demand down further. This last pressure on demand is ameliorated somewhat by the fact that only about 17 per cent of power stations are dual-fuel.

But now the weather has turned in the States. Forty-four inches of snow and 90 miles per hour winds have hit the northern plains of the US. Ice has become a hazard from Texas to Maine.

On the Atlantic coast, the weather in December has been the warmest on record. So it will be interesting to see how January fares.

In continental Europe, Moscow is having warm weather too. Normally at this time of year, the Russian capital is shivering under a blanket of snow. The average temperature in the city in December stood at 15 degrees Celsius above normal. This is like having a maximum July-August summer temperature in Dubai of 60 degrees instead of 45 degrees.

This is causing some confusion in the energy markets. When traders expect its buyers to purchase their cargoes of oil or coal or gas to fill a certain demand, they must be having sleepless nights waiting for prices to rise to show them a profit.

Historically the warming of the ocean surface in the South Pacific has the effect of providing warmer temperatures in the northern hemisphere. But it has almost run its course for its current appearance.

This has prompted a slight rise in the tanker market. Not a great movement, but enough to suggest a bottoming out. But news from the Energy Information Agency (IEA) about a rise in US commercial crude inventories and gasoline stocks slowed rates down and then they softened.

Voyages from the Arabian Gulf to the West ended the week at Worldscale 55, down a couple of points. Voyages to the Far East held steady at about WS75 for Japanese and Korean destinations. In the Atlantic basin we saw reduced activity with BP fixing the Eagle Vienna from West Africa to the US Gulf at WS80.

Rates for West African VLCC cargoes to India have fallen and are now at $3.75 million.

Suezmax

Suezmax cargoes from the definitive West African loading areas have now drifted down to WS105 for US destinations. Persisting Turkish Straits delays have supported the million barrel ships in this area. For example the Seamagic was fixed for 135,000 tonnes from the Black Sea to the Med at WS152.5.

Aframax

Aframax rates in the Med and Black Sea areas are also being supported by transit delays. Black Sea/ Med and cross-Med voyages are being concluded at rates between WS235 and WS285 depending on loading dates. This size of vessel is being concluded from the Gulf at about 100 points lower. Currently it sits at WS140 for voyages to the East, a similar rate is current for Indonesia to Far East cargo movements.

In the clean sector, high naphtha prices are cooling demand and bearing down on rates East of Suez. A slow down in demand in the US has weakened rates for clean tonnage in the Atlantic basin also.

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