TANKER MARKET REVIEW

WEEK 20

VLCC
The pace of fresh activity in the Middle East market slowed significantly this week after charterers covered remaining May requirements and made a slow progression into the June program. By mid-week, the lull saw rates pare some of the gains made last week when activity reached a 6-month high, and downward pressure has remained evident through the remainder of the week. Though negative pressure quickly spread from the Middle East through most load regions in the Atlantic Basin (the Caribbean being the exception), rate losses for voyages commencing in the Middle East were uneven. Owners were initially more resistant to rate losses for Eastbound voyages than they were for Westbound voyages with the latter offering better onward trading prospects than voyages to the East, which many expected would see their units return more quickly into a Middle East market mired in a seasonal Q3 rate lull.

The supply/demand position was at slightly greater disparity this week when compared with week-ago levels. Against a projected 10 carryover units, with the May program concluding with a tally of 122 cargoes and a small number of previously "hidden" units appearing on position lists the number of carryover units is now pegged at 15. Despite this, we believe that the pace of fresh activity was a greater factor in rate progression this week and will likely remain so during the week ahead. Accordingly, if the June program remains as active as the last decade of the May program, a faster pace can be expected, which should at least stabilize rates during the upcoming week (and possibly offer fresh gains from mid-week). Otherwise, a continuation of this week's much slower pace will likely see VLCC markets remain under negative pressure.

Middle East
There were 16 fresh fixtures in the Middle East market this week with 13 of these for voyages bound for points in the East. Rates to the Far East averaged higher this week on the back of last week's late rally and a slower pace of correction this week; these routes gained 4 points, w/w, to an average of ws39.4. The present assessment is ws38.0. Corresponding TCEs averaged ~$19,425/day, representing a w/w gain of ~$7,358/day while the present assessment offers ~$16,559/day. Assessed rates to the USG via the Cape averaged ws22.9, a 0.1 point decline from last week's observed average of ws23. The route is presently assessed at ws22.5. Triangulated Westbound trade earnings gained ~$642/day, w/w, to an average of ~$22,249/day.

With the May program having completed with 122 cargoes, we count 15 carryover units into June dates. There have been 10 June cargoes covered thus far, leaving an estimated 31 cargoes uncovered through the first decade of the month. Against this, some 52 units are expected to be available through the same period of time (including the carryover units). The number of "hidden" units is now likely lower with owners showing these positions to capture the relatively higher returns the market is offering.

Atlantic Basin
Though more active when compared with last week, the Atlantic basin remained slow this week with just seven fixtures reported. Three fixtures for voyages commencing off of West Africa materialized this week; rates to the Far East averaged ws37.25, representing a w/w loss of 0.5 point. TCEs on the route averaged ~$14,955/day, off ~$311/day, w/w. The Caribbean market remained slow, with just one fixture concluded on a CBS-WCIND voyage. Assessed rates on the CBS-SPORE route remained unchanged at the $3.8m LS level as positions remain tight off of normal dates.

Suezmax
The Atlantic Suezmax market was flat this week with rates on the WAFR-USAC route unchanged at the ws55 level. Fixture activity posted a modest improvement on last week with a total of 14 ex-WAFR fixtures reported - though this level is nearly double the YTD weekly average, an oversupply of vessels continues to weigh on rate progression. Rates on the BSEA-MED route shed 6.5 points this week to conclude at ws60 on the back of a wider supply/demand disparity there. With TCEs on the BSEA-MED route now some $3,600/day below those on the WAFR-USAC route, modest rate downside for the latter could be reasonably anticipated during the coming week.

Aframax
The Caribbean Aframax market remained at strength this week on the back of modest weather related delays on the USG, a more limited supply of tonnage and sustained activity. Rates on the CBS-USG route gained 10 points to conclude at ws115. Voyage returns gained to ~$22,100/day - representing a very strong premium to European markets.

The NSEA-UKC route was unchanged at ws80 while rates on the MED-MED route shed 5 points to conclude at ws67.5 on the back of more sluggish activity levels, possibly owing to earlier pipeline issues servicing Ceyhan exports.

Panamax
The Caribbean Panamax market was under negative pressure through much of the week though delays on the USG prevented a further building up of available positions toward the end of the week, likely limiting further rate losses. The CBS-USG route shed 5 points to conclude at ws115. With rates untested at this level and the market remaining quiet, it is difficult to assess how rates will progress at the start of the upcoming week.

CPP
The USG MR market remained strong this week with the USG-CONT route gaining a further 10 points to conclude at ws95. Export levels have gained further on strong PADD 3 (US Gulf Coast) refinery utilization rates and sustained demand is expected through the upcoming week which is likely to see rate gains extend.

The Continent market was under strong negative pressure as rising available positions against slower fresh demand caused a much greater supply/demand imbalance. Rates on the CONT-USAC route shed 26.5 points to conclude at ws143.5. With round-voyage TCEs on the route now ~$15,400/day and triangulated CONT-USAC/USG-CONT voyages offering ~$20,300/day, a much more decisive preference for units coming free off of the USAC to ballast towards the USG is expected, which may ultimately help to stabilize European market rates while limiting the extent of further ex-USG rate gains.