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Thursday, October 18, 2018

Tanker market returns fluctuated heavily in 2002

The market returns on a single-voyage basis went from below break-even to near record levels towards the end of 2002, but were on average low. During the first three quarters of the year, the markets were characterised by many new deliveries albeit also many tankers were sold for demolition.

In this period oil demand was low, OPEC oil production was also low and clean rates remained at a higher level than in the dirty markets. During the first three quarters of the year average time-charter equivalent rates in the spot market were as follows: clean 30,000-40,000 dwt Caribs to US and Cont. to US about USD 9,500 per day, Aframax North Sea – UK Cont. Med. USD 15,400 per day, Suezmax West Africa to US USD 15,600 per day and VLCC AG to Japan USD 11,000 per day. During the last quarter of 2002 rates changed in the dirty trades but not so much in the clean trades: clean 30,000-40,000 dwt Caribs to US and Cont. to US about USD 10,500 per day, Aframax North Sea – UK Cont. Med. USD 33,900 per day, Suezmax West Africa to US USD 30,500 per day and VLCC AG to Japan USD 47,400 per day.

So what is the explanation for this change as the fleets themselves showed marginal changes? (See article above.) During the last quarter of the year, conditions changed dramatically. A general low level of oil stocks, Hurricane Lili, increased seasonal demand, cold weather, the shutdown of nuclear power in Korea and Japan and increased OPEC production led to an improvement in the market. Later in 2002 and at the beginning of 2003, the strike in Venezuela in particular, but also factors such as the Prestige accident and the Iraqi situation, led to increases in the oil price and in natural gas prices. In combination these short-term factors led to further improvements in the market place even though world oil demand remained flat in 2002 compared to 2001.

The charter rate developments can be viewed here.