ClarkSea “Spiking” And Smashing Records!
Last week our cross-sector earnings index, the ClarkSea, recorded its biggest ever weekly percentage move (23% to $20,096/day), and this week we have another record, including the biggest absolute increase (55% to $31,207/day). The current spike is very much tanker driven (VLCCs: $307,888/day!) and this week’s Analysis discusses the background, previous spikes, and some of the longer term trends.
Tanker Take Off…
The main driver behind the dramatic ClarkSea jump has of course been the tanker market, with the tanker element of our ClarkSea Index up 323% over two weeks to $80,255/day, exceeding the previous all-time high of November 2007. Our average VLCC spot earnings series has moved even more spectacularly, up 516% from $50,002/day to $307,888/day!
For some time, our tanker market supply and demand projections have been “encouraging”, with 5% tonne-mile demand growth projected for next year (“boosted” by IMO 2020 changes to refinery throughput and oil product trading patterns) alongside 2% fleet growth (further reduced by crude tankers in repair yards being retrofitted for a scrubber, 2% at end September; see SIN, Oil & Tanker Trades Outlook and our latest IMO 2020 Impact Assessment due to be released soon for further details on these trends). So, heading into the seasonally strong winter, there were some building blocks for an improving tanker market.
But as widely reported, it has been the impact of US sanctions on selected subsidiaries of the world’s largest (3.8% of global tonnage) shipping group and largest (3% of tonnage) oil tanker group that has sent the market into a frenzied scramble to secure tonnage. Further reports of other sanction-related chartering clauses related to Venezuela have added to the confusion, creating additional ingredients for this spike and the bullish position of owners. The market is now also trying to digest the news of another Middle East tanker attack. A major Japanese typhoon has also added disruption.
The previous four biggest weekly moves in the ClarkSea all took place in 2007 and 2008, three driven by the tanker market and one by the bulkcarrier sector. One of these previous spikes took place in early December 2007, when an already tight market was “turbo-charged” by demand for double hull tankers following a Korean oil tanker spill (VLCCs jumped from $120,000/day to $230,000/day in a week) and the Clarksea Index actually reached its highest ever level of $50,714/day. To get to those sort of levels, the tanker market would need much more support from Bulkers, Containers and Gas (although VLGCs have had a positive 2019, with earnings at the highest level since 2015).
Underlying Trends… Aside from this recent frenzy, the ClarkSea has been making broader steadier progress, up for five consecutive months for the first time in a decade and trending up year-on-year since 2016. That seems mundane compared to the past two weeks but perhaps more comforting in the longer term. Have a nice day and, if you can, enjoy the spike!
Source: Clarkson Research Services Limited