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Sunday, March 25, 2018


Owners’ confidence diminishes

Hopes that the VL market had bounced off bottom appear to be faltering this week as quieter days in the market place have eroded owners’ recent new-found confidence almost as soon as it became apparent.

Early this month, rates had dropped to the mid W40s from the W80 seen mid-June, more than halving t/c equivalent returns from USD 45-50,000 a day to USD 20-22,500. Lack of enquiry … midsummer blues … whatever the reason, owners’ confidence had been sapped.

So when a flurry of market activity came along last week, a few owners were quick to push rates up to the mid W50s. Sadly it looks as though that was a flash in the pan, says one London broker. Much of the activity was centred on relatively early dates (end July and early August) for which tonnage was tight, and on 8-10m barrels of ‘special release’ Iraqi crude from Mina al Bakr. Those stems have now been fixed - not on older tonnage as expected, but much of it on relatively modern units. Why the change - isn’t Iraqi crude the preserve of the older VLs? Yes it was, but now post-war Iraqi oil  seems to be in the hands of the oil companies rather then the oil traders. …

Anyway, owners are now waiting for final confirmation of August stems to filter through to the marketplace. The spot market has been quiet and rates have been drifting back down again into the W40s. Any rush of chartering (for August stems) will support rates for a while, but there are plenty of ships around, say brokers, and charterers are therefore expected to take their time and play it cool. While large modern VLs are slightly thinner on the ground than usual up to 10 August, there are roughly 50 younger (less than 15 years) VLs available in the Middle East in the next 30 days to mid August, plus another 14 older VLs and 10 ULs.

Brokers and owners are sounding less positive about the rest of the summer, says one operator, but there’s more optimism for the slightly longer term. The autumn promises its usual upturn as refiners think of winter demand. This year could see additional support for tanker demand coming from low gas stocks in the US - currently 15% below the five-year average. Physical bottlenecks on gas deliveries into the US could mean gas prices moving up and energy companies filling the gap with oil.

Contact: London Office