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Tanker market still in the red, Iran oil ban could have an effect in the long run

Saturday, 04 February 2012 | 00:00
Tanker owners have to add another parameter in their plans for deploying their vessels, besides bunker costs, tonnage oversupply issues and such. The new development calls for the calculation of the recently announced European ban on imports of Iranian crude oil, expected to take effect at the beginning of July. The obvious consequence is the significant shift of crude oil routes.According to the latest weekly report from Gibson, "exports of Iranian crude into Europe increased during 2nd & 3rd quarters 2011, partly as a direct result of the loss of 1.3 million bbls/day of Libyan crude during the civil war. Iran currently exports around 0.7 million bbls/day into the European refinery system, almost half of the Libyan pre-crisis total. Spain and Italy have been the biggest European importers from Iran in recent times. It is also notable that France has gone from zero imports in the 4th quarter 2010 to average 76,000 bbls/day during the 2nd & 3rd quarters of 2011. With Libyan crude exports now nearing pre-crisis levels, by the time the ban is implemented, Europe will be well placed to switch supplies away from Iran. Europe’s economic growth (or lack of it) is also a major factor as demand is unlikely to rise significantly during 2012. Should Europe require to source alternative crude supply, Saudi Arabia is the obvious candidate to make up any shortfall. Saudi Arabia could supply any lost barrels through the Sumed pipeline taking up the capacity vacated by the loss of Iranian crude" said Gibson.
It went on to mention that "at the same time, Iranian exports to the Far East currently represent about 60% of their crude exports. Tougher sanctions on Europe will simply mean more crude will go east. India and China who will cite economic reasons for their reliance on a continuous supply as these economies continue to grow. As a further inducement, Iran may offer crude at discounted prices in order to ensure that exports continue to their largest customers in Asia. After 1st July, the political focus will turn east as the US and Europe attempt to ramp up more pressure on India, Japan and South Korea to join the ban. In the US, tougher financial sanctions are already on the agenda. The other nation which will come under more pressure will be Turkey, the 5th largest importer of Iranian crude (227,000 bbls/day). Although it is not bound by sanctions it is questionable whether imports will remain at current levels given the country’s aspirations to join the EU" says Gibson's report.
It concluded by stating that "as long as Iran has a market for its oil in the east and is able to increase export volumes, then the impact of these sanctions will remain minimal. However, we can be sure that the politicians both in Europe and the US will be exerting more pressure on these nations to at least reduce their oil purchases" said Gibson.
Meanwhile, in the tanker markets this week, it was pretty bad, especially for VLCC Owners in the Middle East Gulf. According to Gibson "volumes did pick up from the previous weeks' very light activity, but availability remained easily plentiful enough to soak it up, and the market turned sharply downwards to end in the high WS 40’s East and WS 32 West. Iran loadings are becoming more problematic for ownership, and the shrinking list of candidates is creating a fledgling two-tier market as premiums are having to be paid on those units that will trade there, and the differential is likely to widen further" said the shipbroker.
It went on to mention that "Suezmaxes will, similarly, see premiums for Iran trade, but otherwise have settled back to around 130,000 by WS 87.5 to the East, though there is some stability now, and rates could start to creep upwards once again. Aframaxes remain in steady territory with 80,000 by WS 112.5 the mark to Singapore and premiums of 10 worldscale points+ payable for Red Sea loading where disputes continue for Sudanese grades.
Suezmaxes lost the stamina for a fight in West Africa and reacted predictably, when Charterers went quiet - by accepting lower rates, and the market bottomed at 130,000 by WS 72.5 for US Gulf. Equally predictably, bargain hunters were tempted to take advantage, and in just enough numbers to probably lead to a modest upward correction again.
VLCCs found little inter-Atlantic trade, and also had to compete with hungrier ballasters from the East for trips in that direction. Rates fell to 260,000 by WS 55 East and also, theoretically, to WS 55 for US Gulf movements. Runs to West Coast India also suffered with a lower USD 3.8 m the 'last done'" said Gibson.
Moving on to Aframaxes in the Mediterranean "they stayed stuck in the same mud that they were stuck in last week. Too many ships, not enough cargoes, and also not enough disruption to allow Owners to achieve any more than 80,000 by WS 85 cross-Mediterranean, and the short term outlook is for more of the same. Suezmaxes also took a hit to as low as 140,000 by WS 72.5 from the Black Sea to European options with WS 70 payable to the US Gulf. The tonnage surplus has now been fairly well pruned, however, and any concentrated enquiry next week will quickly convert into an improvement. In the Caribbean Owners held their heads up through most of the week to keep rates within a 70,000 by WS 135/140 range upcoast, but fog held some of the responsibility for that, and as it clears, the fundamentals will work against rates once again. VLCCs had a much quieter week of it and sentiment suffered due to the weaker West African scene, so the next deals to be seen will move to under the USD 5 m mark for Singapore with around USD 4.5 m available for West Coast India. It was a case of no change at all in the North Sea for aframaxes - thin enquiry, and goodly tonnage, kept rates at around 80,000 by WS 95 cross U.K. Continent, and no higher than 100,000 by WS 105 from the Baltic, and little change in the picture forecast for the near term. Suezmaxes saw very little transatlantic, with rates in theory at around 135,000 by WS 70 for the US Gulf, but there was steady interest to the East where rates held at close to USD 4 m for Singapore. VLCCs failed subjects, and then chased the market lower to USD 4.5 m for Singapore with little early upside on the cards" concluded Gibson.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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