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Saturday, December 16, 2017

Record spot activity for VLCCs

VLCC spot chartering activity has been high since November 2011 and with reference to the graph below, this year saw an all-time high with 201 spot fixtures reported to be made for laycan in February. The high activity has probably been due to traders building up positions on the back of tension surrounding the Iran situation. The high purchasing activity of oil has also resulted in record high oil prices, not in dollars but in euros and pounds.

There was a mini-spike in freight rates at the turn of the year, but the increase in freight rates was rather moderate considering the frenetic activity in the market. This indicates that the surplus of tankers is building up.

The prospects for the underlying oil demand on the other hand has been weakening and projections have been continuously revised downwards by IEA. The actual increase in oil demand in 2011 was 0.74 mbd and the latest projection for 2012 is 0.84 mbd, or up 0.9% on the year. The decline in the OECD region was 0.53 mbd in 2011 and is expected to be 0.39 mbd in 2012. The growth in oil demand in China is also abating, from +1.01 mbd in 2010, +0.44 mbd in 2011 and the projection for 2012 is +0.38 mbd.

High oil prices, coming on top of the relatively weak economic growth in most areas, are contributing to the dampening of demand for oil.

The US imported 8.91m barrels a day of crude oil last year, according to the US Energy Information Administration, down 2.7% since 2010 and the lowest amount since 1999.

Imports as a share of US oil consumption dropped to 44.8%, the lowest proportion since 1995, down from a peak of 60.3% in 2005. Rising fuel prices, driven by tensions with Iran, have become a big political issue in the US and raised concerns that the economic recovery could be derailed. The US remains the world’s largest oil importer by far and is still exposed to the impact of rising oil prices, but the decline in imports has made it less vulnerable. Some analysts and industry executives say present trends support hopes that “energy independence”, a dream of every American president since Richard Nixon, might be achievable over the next two decades.

The period chartering rates have increased slightly for the MRs, but have declined for the larger tankers:

Period chartering – average TC rates (weighted)

Period chartering – number of contracts recorded (2012 covers January and February)

 Contact: Erik Ranheim