VLCC WEEKLY REPORT 07/11/08 - 07/17/08

The week started out at a slow but steady pace, gradually picking up momentum as each day passed, not unexpected as the Saudi program was to be confirmed on Wednesday. An already strong market; Owners were confidently predicting a further rise, as is often the case at this time of the month and although Charterers were loath to agree, there was definitely as upward bias to the market due to the anticipation. Much of the week, however, was spent with both sides of the equation circling each other, trying to find common ground and in the end there proved to be little change in the market. The fact of the matter is that there is adequate tonnage around, in most cases, and the market is at such a level that it is difficult to turn down good business at or close to the right dates when the next opportunity might entail additional waiting, an expensive proposition at current levels, and obviously a gamble many feel not worth taking.

The eastern market was, as usual, the busiest sector and currently the most attractive with rates for double hulls mostly holding in the ws230s for longer voyages with a high of ws242.5 paid for a shorter run to Thailand, equivalent to round trip T/C returns in the $190,000 per day range with bunker prices in the mid $700’s per ton. The single hulls, which have been relatively sparse for a while, are currently populating the position list a little more, and where acceptable, still demonstrate a considerable saving over the larger more modern doubles. They started out the week fixing in the ws190-200 range, slowly rising to around ws210 for longer voyages and in the ws220’s for short-hauls to India. This still produces more than $130,000 per day, very respectable for ships mostly over 15 years old. The west-bound market, employing exclusively double hulls, looks rather competitive in comparison, currently holding in the ws140's. Many Owners can't justify fixing with such a disparity, however invariably there are some who have business in the Atlantic for which the such voyages can be considered more of a backhaul and as long as that continues to be the case, then the market should hold fairly steady. Otherwise the AG/West market should theoretically climb towards the ws160's.

This week there have been 39 fixtures reported, mostly for August loading although there were some left over July fixtures concluded as evidenced below. There have now been a total of 32 fixtures concluded for August loading which does mean there are plenty to come with likely another 20 or so by mid month and 40-45 through the first three weeks, where the normal early month “frenzy” reaches out to. Tonnage wise there are 32 ships that could be available by mid month, including 20 double hulls and a total of 53 units by the 21st. If Charterers can continue as they have this week and be patient, and not all rush in together, there should be a balance in supply and demand that will keep the market stable despite the fact that in the current environment, there can always be someone who gets caught and has to pay up, but that should be an exception rather than a rule. That said, if past months are anything to go by, next week will be busy and patience will “go out of the window” and the market will climb.

The Atlantic continues to be relatively quiet for VLCC’s, surprising considering the strength of the alternate suezmax class that climbed to the higher ws200’s. Rates for the larger units currently remain in the ws180’s for trans-Atlantic cargoes and improved marginally to ws165 for the east and there are enough ships around, as and when activity picks up, to keep rates stable for now. It should be noted, however, that with the strong MEG market as a serious alternative, some owners are already talking rates some 20 points above those levels and, although anything is yet to be concluded, only a little activity will drive rates up rapidly, for which there is room when one considers the other markets.