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Saturday, December 16, 2017

VLCC supply tight in the Arabian Gulf – conversion replaces demolition to counterbalance deliveries

There is rarely a stronger increase in the crude oil tanker market than that witnessed over the last two weeks as VLCC rates increased by USD 150,000 per day over the period. According to London-based broker Clarksons, a record number of 180 VLCC fixtures were made in November, 108 of which were eastwards, which was 38 above the average for 2007.

 

Trade

 

Average Monthly VLCC fixtures

2001

2002

2003

2004

2005

2006

 

2007

 

Nov-07

PG - West

25

24

31

34

25

23

29

28

PG - East

54

45

57

64

60

61

70

108

PG - RS

3

4

2

3

3

3

0

0

Others

35

31

32

32

29

31

35

44

Total

117

104

123

133

117

118

134

180

Arrivals

52

52

33

33.75

48

61

29

73

Source: Clarksons

 

g

 

 

According to the BraemarSeascope figures, the number of VLCCs arriving in the Persian Gulf (PG) in the next 30 days has fallen dramatically from around an average of 99 in the period 26 Jul. to 27 Sep. to an average of 66 in the period 27 Sep. to 6 Dec. It is in particular the number of single hull (SH) VLCCs arriving in the PG that has fallen, from an average of 48 for the period 19 Jul to 27 Sep. to an average of 29 for the period 27 Sep. - 6 Dec. The average number of SH VLCCs arriving in PG in the next 30 days for the period 8 Nov. - 6 Dec. was 24.

 

 

Periods- figures
for weeks ending

Average weekly figures

Arriving PG Double hull

Arriving PG Single hull

Total arriving PG

Average no of fixtures

26-Jul-07

27-Sep-07

51

48

99

28

04-Oct-07

06-Dec-07

32

29

61

27

15-Nov-07

06-Dec-07

19

24

43

28

26-Jul-07

06-Dec-07

41

39

80

28

Based on figures from: Braemar/Seascope

 

According to the Braemar/Seascope figures, it is not so much the activity that has increased but the availability of VLCCs in the PG that has declined.

 

It seems to be the tanker supply side that has done the most to cause the very tight situation in the market. Some 30 VLCCs are to be delivered this year; but while none have been sold for decommissioning, close to 50 have been reported as heading for conversion. Instead of the anticipated VLCC fleet increase there may therefore actually be a fleet decline this year. The SH VLCCs are disappearing fast. The Hebei Spirit oil spill outside Korea may be causing some uncertainty in the market with regard to the acceptability of SH VLCCs - South Korea has been one of the biggest discharge areas for SH VLCCs. However, new information at the time of writing shows that the number of fixtures in the last week increased to 37, up from 17 in the previous week, which indicates that increased activity during the last week has probably been the reason for the continued rise in rates.

 

The table below shows the double hull (DH) VLCC share in the biggest discharge areas – while many areas are increasing their DH share, or at least holding fairly steady, South Korea went from 46% to 26% in 6 months :

 

Discharge area

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

Japan

72%

74%

72%

76%

73%

83%

USA

86%

88%

87%

88%

90%

92%

China

60%

75%

75%

74%

72%

76%

South Korea

37%

36%

37%

43%

42%

26%

Egypt (Red Sea)

68%

59%

75%

67%

60%

72%

India

41%

34%

26%

32%

27%

26%

Singapore

89%

92%

84%

85%

88%

85%

Taiwan, China

47%

47%

41%

30%

32%

40%

Thailand

56%

43%

37%

45%

45%

37%

Netherlands

90%

81%

79%

88%

91%

85%

France ( North)

91%

97%

100%

97%

100%

97%

Canada

86%

100%

82%

95%

97%

100%

South Africa

88%

94%

90%

93%

93%

100%

Indonesia

28%

59%

50%

0%

43%

52%

Philippines

46%

47%

39%

14%

27%

46%

St. Eustatius

67%

50%

100%

60%

84%

86%

Brazil

83%

100%

100%

100%

76%

100%

Source: Fearnleys AS

 

The global oil market will continue to be fairly tight, given that OECD inventories will remain relatively low through at least the first half of 2008 and that OPEC surplus capacity will continue on the low side.

 

Contact: Erik Ranheim