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Friday, December 15, 2017

Reduction in AG/West fixtures as well as new deliveries dampen tanker market

With freight rates plummeting lower than anticipated, it may be little consolation that the first half of 2005 has actually been, on average, a relatively good year for the tanker industry.

USD/day rates

2001

2002

2003

2004

2005*

Average VLCC, AG-Japan

32,900

12,200

66,900

91,900

43,537

Average Suezmax , W Africa-US

30,900

16,000

51,700

62,500

41,820

Average Aframax , N Sea-UK Cont

32,400

17,500

35,900

43,600

28,127

Average product, Caribs-US

17,500

9,500

22,300

22,900

17,448

*until 5 July

It is the short period from end January to the second week of March that has kept up the average rates for VLCCs. According to Clarksons, the average VLCC fixture level has been about the same as for 2004 - except for AG-West where, during Jan-June 2004, 220 fixtures were made, says Clarksons, and during Jan-June 2005 only 154 fixtures were made.  Taking into account that these in general are the longest routes, this partly explains the large fall in freight rates, alongside the fact that more new ships have entered the market. The surprise is that the number of fixtures going West have declined at the same time as U.S. crude oil imports have increased (by some 3.5% for first half of 2005 compared to the same period in 2004).

Some 30m dwt of tanker tonnage is due for delivery in 2005. We have recorded 3.6m dwt of tanker tonnage above 10,000 dwt sold for decommissioning during first half 2005, including a VLCC that had been used for storage, and a 133,000 dwt combination carrier.  We still estimate some 6m dwt due for phase out in 2005, but this includes 0.9m dwt below 30,000 dwt and 3.1m dwt 30-60,000 dwt. That means 1.9m dwt above 6,000 dwt due to be phased out of the oil trades during the second part of 2005.

In the 30-60,000 dwt we have 97 category 1 ships recorded of which:
-   5 were built after June 1982 and may disappear at  their anniversary date later this year.
-   47 others were built 1978-1982 and may have been upgraded to Category 2 tankers and may therefore trade until 2006 (24 1978/79 built) or 2007 (17 1980/81 built) or 2008 (6 built first half 1982)
-   the 45 that were built 1959 to 1977 may be in non-petroleum trades or in local trades not subject to MARPOL phase-out.

That is the supply side of the equation. Trends on the demand side show that U.S. gasoline imports increased by some 11% to 0.282 mbd over the first half of 2005, while on the other hand U.S. distillate imports declined.

European crude oil imports declined by 2.5% to 12.91 mbd 1Q05 but European oil products import increased by 13% (0.67 mbd) to 5.74  1Q05 compared to 1Q04.

Japanese crude oil import declined by 0.7% to 3.27 mbd up to May 2005 but Japanese oil products import increased by 6% to 0.67 mbd 5.74  1Q05 compared to 1Q04.

Contact: Erik Ranheim