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Monday, December 11, 2017

Just how many VLCCs do we need?

There is a surplus of tankers in the market, but it is hard to see exactly what the surplus is as there is no lay-up and few tankers are being used for storage. Pretty much the only way that we can see that there is a surplus is in the low freight rates.

That said, freight rates can fluctuate strongly over a short period due to special events and fluctuations in the availability of tankers in the area in question. However there are relatively few VLCC trades, and it is therefore feasible, and also important, to make a reasonable estimate for the need for VLCCs.

 

VLCC trades from West Africa are to a great extent backhaul trades which means that the actual surplus would be higher.

Trades to the US/Europe can be done part-laden through the Suez Canal in combination with the use of the SUMED pipeline, which also means additional extra capacity is available.

VLCCs can in general make more than 14 knots, and if the overall speed is increased by just half a knot, that produces the same result as adding another 13 VLCCs to the fleet.

If the speed, on the other hand, is reduced to just under 12 knots for the whole fleet, the surplus disappears.

Looking at VLCC spot chartering over the last couple of years, spot chartering to the US has been around 16% of the total (17% this year), Japan-Korea has been just over 21% (18% so far in 2012) with most of the oil to Japan going under long-term contracts. China has been steadily increasing its share of VLCC spot chartering from 33% in 2010 to 36% in 2011, and it has had a 41% share so far in 2012. 

We welcome any comments on the above setup and if you would like to view the spreadsheet the table is based on to do your own calculations, we will happily supply it to you upon request.

Contact: Erik Ranheim