IEA June 2007 Report on Tanker Rates
Crude freight rates gradually eased from near the top of five-year ranges in early May to finish the month below seasonal averages. Floating storage charters in the US Gulf and some increased long-haul trading restrained crude tanker supply. This prevented a dramatic slide in dirty rates, despite Nigerian outages and muted OPEC exports continuing to undermine vessel demand. Refinery maintenance in Asia supported product trade and demand for clean tankers. Low stocks and refinery outages maintained the need for gasoline imports into the US in May.
Trade data reveal that Nigeria was the third-largest provider of crude to the US in March, above Saudi Arabia for the first time. However, extensive outages have now reduced Nigerian export cargoes. OPEC cuts remain in place and Vela spot charters for June are reportedly near three-year lows. Furthermore, refinery maintenance, now focussed on Asia, usually undermines vessel demand in May. Despite these factors, VLCC freight rates had fallen only slightly below five-year averages by the end of May. Middle East Gulf rates to Japan and the US Gulf in early May were well above average, reaching around $13/tonne and $22/tonne respectively. One month later, rates for both routes had only dropped by around $2/tonne. They remain higher, on a $/tonne basis, than almost all rates seen between mid-October and February.
One factor supporting rates has been the reductions to vessel supply caused by the increased use of VLCCs as floating storage in the US Gulf. The prevailing wide contango in WTI has made it economic to charter VLCCs specifically for floating storage. Some VLCCs arriving in the US Gulf with valuable African crude have also invoked a clause to store offshore before discharging.
Vessel supply has been further reduced by incremental long-haul chartering. Asian purchases of West African crude reportedly hit 14-month highs for June on increased buying from China and evidence of the first cargoes for Indonesia in more than a year. Clearly Nigerian exports may be disrupted, but Angolan loading schedules suggest exports there will increase. Furthermore, Indian refiners have been increasingly looking to Mediterranean crude markets and there has even been a recent Chinese purchase of Canadian crude.
Elsewhere in the dirty sector, Nigerian outages caused westbound Atlantic Suezmax rates to weaken by $2-3/tonne in May. Cross-Mediterranean Aframax rates showed their volatility again by falling from sixmonth highs of $21/tonne in early May to 18-month lows of $7/tonne in early June. Aframax demand in June has been dented by a rise in Russian export duties and North Sea maintenance.
Clean product tanker rates rose in May. Asian clean rates were supported by increased trade of productsduring refinery maintenance. Rising Asian petrochemical capacity continues to boost demand for naphtha imports from Saudi Arabia and India. In the Atlantic basin, discharging delays caused an unusually large vessel backlog at Lagos port in late May, temporarily reducing vessel supply. Transatlantic clean rates were further boosted by the continued need for gasoline imports in the US, where stocks remain historically low. UK continent to US Atlantic Coast rates for 33,000-tonne clean cargoes rose by $4/tonne from the start of May to reach $28/tonne in early June.
Trade data reveal that Nigeria was the third-largest provider of crude to the US in March, above Saudi Arabia for the first time. However, extensive outages have now reduced Nigerian export cargoes. OPEC cuts remain in place and Vela spot charters for June are reportedly near three-year lows. Furthermore, refinery maintenance, now focussed on Asia, usually undermines vessel demand in May. Despite these factors, VLCC freight rates had fallen only slightly below five-year averages by the end of May. Middle East Gulf rates to Japan and the US Gulf in early May were well above average, reaching around $13/tonne and $22/tonne respectively. One month later, rates for both routes had only dropped by around $2/tonne. They remain higher, on a $/tonne basis, than almost all rates seen between mid-October and February.
One factor supporting rates has been the reductions to vessel supply caused by the increased use of VLCCs as floating storage in the US Gulf. The prevailing wide contango in WTI has made it economic to charter VLCCs specifically for floating storage. Some VLCCs arriving in the US Gulf with valuable African crude have also invoked a clause to store offshore before discharging.
Vessel supply has been further reduced by incremental long-haul chartering. Asian purchases of West African crude reportedly hit 14-month highs for June on increased buying from China and evidence of the first cargoes for Indonesia in more than a year. Clearly Nigerian exports may be disrupted, but Angolan loading schedules suggest exports there will increase. Furthermore, Indian refiners have been increasingly looking to Mediterranean crude markets and there has even been a recent Chinese purchase of Canadian crude.
Elsewhere in the dirty sector, Nigerian outages caused westbound Atlantic Suezmax rates to weaken by $2-3/tonne in May. Cross-Mediterranean Aframax rates showed their volatility again by falling from sixmonth highs of $21/tonne in early May to 18-month lows of $7/tonne in early June. Aframax demand in June has been dented by a rise in Russian export duties and North Sea maintenance.
Clean product tanker rates rose in May. Asian clean rates were supported by increased trade of productsduring refinery maintenance. Rising Asian petrochemical capacity continues to boost demand for naphtha imports from Saudi Arabia and India. In the Atlantic basin, discharging delays caused an unusually large vessel backlog at Lagos port in late May, temporarily reducing vessel supply. Transatlantic clean rates were further boosted by the continued need for gasoline imports in the US, where stocks remain historically low. UK continent to US Atlantic Coast rates for 33,000-tonne clean cargoes rose by $4/tonne from the start of May to reach $28/tonne in early June.
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