Tanker Market Declines by 28% in January
The tanker market has reeled under the pressure of abundant tonnage supply during the month of January, according to the latest monthly report from OPEC. Following gains registered in the tanker market in the previous quarter, average dirty tanker spot freight
rates declined by 28% in January, reversing all earlier profits. Lower rates were seen in all reported dirty classes in January, which was mainly attributed to thin market activity in general, while vessel supply remained abundant. Dirty tanker average freight rates showed a drop from the previous month as VLCC, Suezmax and Aframax rates fell 36%, 31% and 24%, respectively.
Clean tanker spot freight rates were no exception, as they were impacted by the general downward trend which overtook the tanker market in January. A lack of activity was seen dominating different classes, leading to a decline in average clean tanker spot freight rates by 18% from a month before.
According to preliminary data, global fixtures dropped by 3.8% in January compared with the previous month. OPEC spot fixtures were down by 3%, or 0.43 mb/d, to average 13.78 mb/d. Fixtures on the Middle East-to-East route averaged 7.90 mb/d in January, down by 0.14 mb/d from one month ago, and those on the Middle East-to-West route averaged 1.41 mb/d. Outside of the Middle East fixtures averaged 4.47 mb/d in January, dropping by 0.19 mb/d m-o-m. Compared with the same period a year before, most destinations showed higher fixtures than in 2018.
Sailings and arrivals
Preliminary data shows OPEC sailings were 0.2% higher m-o-m in January, averaging 25.33 mb/d. This was 1.01 mb/d above the same month a year ago. Middle East sailings also went up by 0.2% from the previous month and by 5.1% from a year ago.
January crude arrivals were mixed, registering increases in most areas. Arrivals in North American, Far Eastern and European ports increased by 7.2%, 3.5% and 0.3%, respectively, from one month ago, while arrivals in West Asia declined by 2.1% m-o-m to average 4.44 mb/d in January.
Dirty tanker freight rates
Very large crude carriers (VLCCs)
Following an increase in 4Q18, VLCC freight rates saw softer sentiment at the beginning of the year as the month started with rates decreasing. Tonnage availability was building and activities were declining, which is normal during the month as a result of the holidays.
In January, spot freight rates declined on all reported routes. A tonnage build up in the east drove freight rates down significantly and delays in Eastern ports did not support freight rates. As a result, freight rates registered for tankers operating on the Middle East-to-East route fell by 36% from the previous month to stand at WS56 points in January.
Similarly, West Africa-to-East routes dropped by 35% from a month ago to average WS56 points in January as the West African market was mostly quiet. Middle East-to-West routes declined by WS14 points from the previous month to stand at WS24 points,
impacted by general downward pressure in the region, though rates dropped to a relatively lower degree. The softening trend for VLCC spot freight rates stabilised by month end, yet vessel supply in different areas remained more than sufficient to prevent rates from increasing. Nevertheless, average VLCC freight rates in January remained 23% above those of the same month a year before.
Suezmax average spot freight rates experienced a higher drop than those of VLCCs in January. On average, Suezmax rates fell by WS32 points from a month earlier. Rates for tankers operating on the West Africa-to-USGC route decreased by WS33 points to average WS77 points. Rates on the Northwest Europe (NWE)-to-USGC route fell by 32% in January from the previous month to average WS65 points.
The drop in freight rates came as a result of weak tonnage demand and a subsequent tonnage build-up due to slower activities in the holiday season. Delays at the Turkish Straits increased steadily as well as cancellations at Çanakkale, however tonnage was sufficient to absorb the effect of any delays in January.
Aframax spot freight rates saw the largest decline compared with other tankers in the dirty segment. Freight rates on all reported routes showed a drop from the previous month, with no exception. Aframax spot fright rates often fluctuated during the month and in several areas, however they showed an average general decline.