TANKER MARKET - WEEK 4

VLCC
The Middle East market was extremely quiet this week as several eastern charterers were absent owing to the New Year holiday week whilst many of the remaining charterers stepped back from the market, possibly in hopes that the resulting inactivity would drive rates down. Though rates remained relatively stable throughout much of the week (albeit with many key routes largely untested), nearer to the close of week the lull appeared to have taken its toll and rates did indeed post small declines. The story was not far different in the Atlantic basin, where ballasting units from the East continued to hold the position list sufficiently populated to allow for a slight decline in rates in tandem with those observed in the Middle East given the reduced opportunity cost argument.

In the Middle East market, there were just 8 fresh fixtures reported this week. Of these, all but one were bound for the East. Rates to the far east averaged ws62, representing a nearly 6 points gain w/w-though this is largely attributed to the rallying market late last week and the delay before rates ultimately commenced their decline late this week. Average TCEs in this direction were ~$38,100/day. Rates to the West held steady at the ws35.5 level throughout the week, with a corresponding average TCE of ~$2,400/day on the MEG-USG route. Triangulated westbound trade earnings averaged ~$40,700/day.

To date, some 60 February Middle East cargoes have been covered, representing approximately half of the February program. Through mid-month, 22 units are projected to be available; although some of these will likely bypass the Middle East in favor of the more attractive returns in the Atlantic basin, supply remains abundant which implies further easing of rates in the Middle East. Increased activity by eastern charterers on their return could provide sufficient activity to cause rates to rebound before an eventual easing.

The Atlantic basin presided over another busy week with 11 fixtures reported - though many of these were concluded at the tail end of last week, and from early this week a quieter period prevailed due to Eastern holiday. As activity slowed and ballasting units vied for fewer cargoes, the market experienced some easing of rates; ws59 is the latest reported rate on the WAFR-China run, which is a 6-points drop from a week ago. Trans-Atlantic interest remained prohibitive due to the more economical nature of the Suezmax class at present rates; this has been the case for some time with nearly a month having passed with a VLCC fixture on this route. Caribbean-Singapore rates held steady around the $5.3m level as USG positions continued to tighten. With eastern charterers back next week it is expected that activity in the Atlantic basin will pickup-particularly given the recent surge in interest for crude sourced from locations alternate to the Middle East. Accordingly, rates should hold steady.

Suezmax
The Atlantic Suezmax market experienced a small measure of further downward pressure on rates this week as trans-Atlantic activity was limited and overall pressure on tonnage declined in tandem to the normalization of transit times in the BSEA/MED market. Rates on the WAFR-USAC benchmark route eased about 1.5 points this week to the ws80 level. At the close of the week, however, a rebound in activity has made owners more bullish and although no observable rise in rates has been recorded, a continuation of activity during the week ahead could see rates post modest gains.

Aframax
The Caribbean Aframax market commenced the week with negative pressure, declining from ws125 to ws120 before a pickup in interest in the Aframax class coupled with the working of some cargoes off prompt dates retested the market higher around ws130. At the end of the week, with at least four cargoes outstanding pressure on tonnage remains. The market concluded around the ws137.5 level and may commence next week around the ws140 level.

Panamax
Although activity remained generally limited, rates on the CBS-USG benchmark route posted a 5-point gain to ws110 at midweek on retesting and remained at this level through the remainder of the week. In part, oversupply issues have been offset by the continued strength in rates in the European market, where TCE returns are ~$5,000/day above those in the Caribbean. This has prompted some units to ballast to Europe whilst allowing owners with units remaining in the Caribbean to cite the ability to ballast as a means preventing rate losses.

CPP
MR rates extended last week's losses across all Western markets this week as uncertain arbitrage windows saw the activity lull remained whilst available tonnage continued to mount.

In the Caribbean, rates on the CBS-USAC benchmark route declined 10 points to conclude at ws130. Given the extent of losses in this market since early January and with a number of units having ballasted towards the better returns offered in the European market, there is some reason to believe that more resistance next week may stem further losses. Backhaul USG rates declined into the mid-ws60s, but with owners expecting that the European markets will soon follow those in the Caribbean on rising tonnage, there is little incentive now to trade cargoes towards Europe and accordingly rates on the route have likely reached a near-term trough. Rates on the CONT-USAC route slipped to ws140 this week, but with a number of ballast units expected to populate the list next week, these could decline further into the ws130s.