IEA Tanker Rates

From IEA Oil Market report February 2007

Freight rates for large tankers from the Middle East Gulf plunged to nominal three-year lows in mid-January before rising later in the month. Colder temperatures supported spot vessel demand in the Atlantic basin, boosting dirty rates in the second half of January. Comfortable Asian product stocks continued to undermine clean product tanker rates for east of Suez trading in January.

From IEA Oil Market report January 2007

Freight rates for VLCCs, the two million-barrel crude carriers, continue to be undermined by OPEC output cuts and mild winter temperatures in consumer regions. In contrast, typical seasonal delays in the Turkish Straits in mid-December caused shipping rates for medium-sized crude cargoes to spike in the Mediterranean and further afield. Clean product shipping costs firmed in December, boosted by higher demand for product imports in Asia and sustained above-average gasoline imports into the US.
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Reduced OPEC exports continue to weigh on VLCC rates from the Middle East Gulf. Eastbound
vessel demand was dented on 11 December when Saudi Arabia notified certain Asian customers that crude cargoes would be reduced by 8-9% below term-contract volumes in January. Japan-bound VLCC rates remained around $9/tonne in December, approximately half the December 2005 average. Reports of deeper Saudi cuts to Asian cargoes in February add downside risk to eastbound rates.
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Tanker movement reports suggested that there was a slight increase in crude moving to Western markets towards the end of December. Nevertheless, rates have faced downward pressure from reduced demand following mild temperatures and lower oil-on-water. VLCC rates for ships heading for the US Gulf were down to $14/tonne at end-2006, dramatically lower than the end-2005 value of $25/tonne.
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Mediterranean Aframax rates more than doubled in mid-December as transit delays through the Turkish Straits stretched regional vessel availability. Delays of six to seven days in both directions during a busy trading period pushed Black Sea to Mediterranean Aframax rates (for approx. 600 kb cargoes) from $10/tonne on 8 December to over $22/tonne on 15 December. Increased Balticexport activity in December added further constraints to the Aframax fleet. The sentiment of vessel tightness spread across the Atlantic to the Caribbean and worsened when fog also caused mid-December closures to major shipping channels feeding US Gulf refineries. Caribbean to US GulfAframax rates gained over $5/tonne to top $15/tonne mid-month. Demand for million-barrelSuezmaxes in the Mediterranean and West Africa was also boosted by the reductions to Aframax supply. West Africa to US Atlantic Coast Suezmax rates rose from under $13/tonne to almost $20/tonne in the middle of December. However, as delays cleared towards end-year, most Aframax and Suezmax routes lost the majority of their mid-month gains, returning to unseasonably low levels.
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Clean tanker rates returned to usual winter levels in December after an unseasonably weak November. Most notably, Asian rates rose as winter product trade supported regional vessel demand. Naphtha trade from the Middle East Gulf to Japan was boosted by Asian petrochemical plants restarting after maintenance and the diversion of competing Indian naphtha exports to domestic fertiliser production. 75,000-tonne rates for this trade rose from $21.50/tonne at the start of December to $32/tonne in early January. In the west, US demand for gasoline imports remained firm in December as low stocks kept upward pressure on transatlantic clean rates. Clean rates corrected downwards in January, especially in Europe, following the build-up of a surplus of tonnage available for charter.



From IEA Oil Market report December 2006

Reduced OPEC exports prompted further counter-seasonal declines in crude freight rates from the Middle East Gulf in November. VLCC spot charter rates to Japan are now at a quarter of last year’s rates and corresponding front-quarter freight futures recently hit a four-year low. In a depressed dirty sector, only Suezmax rates in the Atlantic basin showed any firmness, temporarily buoyed by protracted US refinery maintenance which boosted demand for vessels to import light, sweet crudes. Clean tanker rates lost ground in November until some Asian product trade activity spurred an endmonth rebound.

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A November slump in Middle East Gulf crude rates suggested slackening export activity as OPEC supply cuts took effect. Tanker movements reports confirmed this, showing steep declines in sailings from the region in November and significantly reduced volumes of oil in transit. The resultant surplus of vessels for hire in the region dragged November VLCC rates to Japan down by $2/tonne to finish around $8/tonne. Corresponding rates to the US Gulf lost slightly less than $2/tonne and ended the month around $16/tonne.

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Declining VLCC rates in November are unusual. Even ignoring the exceptional fourth quarters in
2004 and 2005, dirty shipping rates normally rise as refiners build crude stocks ahead of winter. This year, busy summer flows left third-quarter OECD crude stocks high, which has helped undermine crude vessel demand in the fourth quarter. Nonetheless, OECD product stocks dropped to seasonal levels in October and preliminary November data showed further draws in the US. A cold snap in consumer regions would not only push refiners to raise utilisation rates but would also increase competition for spot crude cargoes. This could have trade implications which support crude freight rates especially if long-haul arbitrage windows are forced open.

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A slow restart after US refinery maintenance lent some late-November support to dirty freight rates in the Atlantic basin. Upgrading units were particularly slow to return, boosting interest in
transportation for million-barrel cargoes of distillate-rich Atlantic crudes. West Africa to US Atlantic Suezmax rates rose by $4/tonne in the second half of November to $14/tonne but lost most of thesegains in early December. Caribbean Aframax rates weakened throughout November and briefly fell below $10/tonne in the first week of December after highs of over $14/tonne in October. Heavy maintenance to complex refinery units in the US Gulf deflated demand for transportation for low quality crude from Mexico and Venezuela. Mediterranean rates fared little better.

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Clean tanker rates rebounded at the end of November after falling to multi-month lows in the first half of the month. Maintenance at exporting refineries and importing petrochemical plants had stemmed product flows in Asia, reducing clean tanker demand. Rising Indian naphtha exports have also diluted large product tanker rates from the Middle East by offering an alternative naphtha supply option but exporting in smaller product vessels. Transatlantic product trade was tempered by mild weather, despite heavy refinery maintenance. However, forecasts of colder US temperatures, a couple of trans-Pacific charters, diversions of Indian naphtha to the domestic power sector and draws in Japanese kerosene stocks all combined to prop up clean rates as November ended. Singapore to Japan rates for 30,000-tonne clean cargoes, which reached $24/tonne in August, hit a low of $11.50/tonne mid-November before rebounding back over $20/tonne at the start of December.

From IEA Oil Market report November 2006




From IEA Oil Market report October 2006