Asia Tankers-VLCC Rates to Hold Steady

File image of a typical VLCC underway (Credit: EuroNav)

Posted by Joseph Keefe

25 MidEast cargoes still to be fixed; VLCC rates fall to 4-month low.

Freight rates for very large crude carriers (VLCCs), which hit a four-month low on Thursday, are likely to hold around current levels or nudge higher as charterers fix the final charters in February's loading programme from the Middle East.

Brokers however said an oversupply of tonnage from a raft of new vessel deliveries and older tonnage coming free after being used for floating storage are expected to cap any gains in rates.

Around 25 VLCC cargoes from the Middle East have yet to be fixed, said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.

"That will make for a busy week next week. The potential for rates to firm is there, but there is a long list of available tonnage," he told Reuters on Friday.

Activity has increased in the last two days, with more enquiry from potential charterers improving sentiment, said a second Singapore supertanker broker, who declined to be identified because he wasn't authorised to speak to the media.

"There has been a breath of fresh air compared to the doom and gloom previously. As for rates, I think they've possibly bottomed out for the time being but I don't see much to suggest rates increasing particularly," the second broker said.

VLCC rates from the Middle East to Japan fell to around $29,671 per day on Thursday, the lowest since Oct. 4, chartering data on the Reuters Eikon terminal showed.

That is down from $69,468 per day on Dec. 20 which was an eight-month high.

"Rates have been brought down by newbuilds and ships coming out of storage plays," Sharma of BRS Baxi said.

Tanker deliveries reached a record high in January, with at least 12 new VLCCs hitting the water, said shipping industry lobby group BIMCO.

The 12 vessels totalled 3.68 million deadweight tonnes (DWT), around half the amount in tonnage terms delivered in the whole of 2014 and 2015, said BIMCO's chief shipping analyst Peter Sand in a note on Thursday.

"This record-high crude oil tanker delivery growth is troubling, and worsens the balance between supply and demand instantly due to sluggish demolition in this segment," he said.

Refinery maintenance in the Middle East and Asia - with up to 900,000 barrels per day of capacity offline in China - in the first half of this year could add to the oversupply of tonnage, according to brokers and research houses including Energy Aspects.

VLCC rates on the Middle East to Japan route dropped to around 66.50 on the Worldscale measure on Thursday from W78.25 last week.

Rates on the West Africa-to-China route fell to around W71 on Thursday against W76.75 the week earlier.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to around W105.25 on Thursday, equivalent to $10,120 per day, from about W110.50 the same day last week.

Reporting by Keith Wallis

Feb 3, 2017

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