Friday, July 27, 2007

IEA July 2007 Report On Tanker Rates

Freight Rates

VLCC rates from the Middle East Gulf drifted below seasonal averages in June, falling most notably on westbound trades. Global volumes of oil at sea are now unseasonably low. The upside potential for rates in the summer, prompted by a decline in Asian refinery maintenance, is diluted by ongoing limits on OPEC exports. Interest in crudes from the Atlantic Basin and Mediterranean pushed rates from these regions slightly higher in June. Ample tonnage eroded clean tanker rates in the Atlantic Basin in June, despite high US gasoline imports.

Tanker trackers report that volumes of oil in transit remain well below seasonal norms, apparently confirming low vessel employment for this time of year. Growing VLCC availability was boosted further in the second half of June by the discharge from several of these two-million barrel vessels which had been storing crude temporarily in the US Gulf. VLCC rates from the Middle East Gulf to US Gulf fell from $20/tonne[$2.73/barrel] at the start of June to around $15/tonne[$2.05/b] in early July.

OPEC cargo reductions continue to undermine any potential for a seasonal rebound in vessel demand as Asian refineries return from maintenance. In line with recent months, Saudi Arabia announced that it will supply 9-10% less crude to refineries in the Far East than contracted volumes in August. VLCC rates from the Middle East Gulf to Japan, now booking for loading in August, are currently around $9/tonne[$1.23/b], down by over $3/tonne from early June. However, eastbound rates have shown signs of rebounding in early July.

Suezmax rates from West Africa to the US Atlantic rose by over $1/tonne, to reach $11.50/tonne[$1.57/b] in the second half of June. Corresponding VLCC rates rose by a similar amount in early July. While these increases coincided with a temporary halt in hostilities from a major rebel group in Nigeria and delays at Nigerian ports, higher Mediterranean chartering was probably more supportive. Black Sea to Med million-barrel rates jumped by $4/tonne in the middle week of June, peaking at almost $12/tonne[$1.64]. There were also reports of improved economics for spot exports of African or FSU grades to the US. Increased interest in Aframax vessels in the Caribbean lent support to late-June rates for the sector and reduced broader vessel availability. Brisk chartering elsewhere contributed to firmness in Aframax rates in the North Sea in June, despite maintenance at production facilities.

Clean product tanker rates fell in June, especially in Western markets. Clean rates for 30,000-tonne trades from Northern Europe to the US Atlantic Coast dropped below $20/tonne[$2.73] at the end of June having started the month near $26/tonne[$3.55]. US gasoline imports remain but increased supply of product tankers in the Atlantic and Mediterranean have had an offsetting effect on spot charter rates. By contrast, limited tanker availability may have bolstered Singapore to Japan clean rates in late June following a quiet month of chartering activity, when refineries increasingly returned to operations.
IEA Oil Market Report July 2007

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