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Tanker Market Edged Higher During December

The tanker market posted a mild rebound during the month of December. According to the latest monthly report from OPEC, dirty tanker rates experienced a slight improvement m-o-m in December, while still remaining near multiyear lows amid a persistent imbalance in tanker demand and availability. VLCC and Suezmax rates saw some improvement on eastward rates from the Middle East and West Africa, as well as from West Africa to the US Gulf Coast. Aframax rates edged lower, weighed down by a sluggish intra-Med performance. Clean tanker rates continued to see a pick up from multi-year lows seen at the start of the 4Q20, with gains both East and West of Suez. As with the oil market and the global economy as a whole, 2020 was a volatile one for the tanker market. However, in contrast to the oil market, March and April were ‘golden’ rather than ‘black’ months as tanker freight rates soared to record highs in all major shipping regions. Dislocations caused by the COVID-19 crisis resulted in an excess of crude in the market as consumption collapsed, overwhelming onshore inventories and leading to a surge in floating storage demand for both crude and products, all of which supported tanker rates across the globe. By June, spot freight rates had fallen back to lower levels, where they remained for the rest of 2020. While ongoing efforts to address the imbalance in the oil market by OPEC and participating non-OPEC countries in the DoC may reduce tonnage demand in the near term, the tanker market will benefit as the reduced overhang stabilizes oil trade trends, and as easing lockdown measures and a rollout of the COVID19 vaccine supports a return of economic activity.

Spot fixtures
Global spot fixtures declined m-o-m in December, after increasing the month before, falling 1.2 mb/d, or 7.2%, to average just under 15.1 mb/d. The decline occurred across all major routes. Spot fixtures were 3.2 mb/d, or more than 17%, lower than the same month last year, reflecting the overall muted environment due to the COVID-19 pandemic.

OPEC spot fixtures averaged 9.7 mb/d in December, representing a decline of almost 8% m-o-m, or 0.8 mb/d. Compared to the same month last year, OPEC spot fixtures were around 21% lower, or almost 2.7 mb/d, reflecting in part the production adjustments from OPEC countries. Fixtures from the Middle East-to-East averaged 5.7 mb/d in December, representing a decline of more than 0.7 mb/d, or around 11%, m-o-m. Y-o-y, this represents a decline of 1.0 mb/d or almost 16%. Middle East-to-West fixtures continued to lead the m-o-m losses, falling 13%, or 0.1 mb/d, in December to average 0.8 mb/d. This was still 0.7 mb/d, or 47%, lower compared with the same month last year. Outside of the Middle East, fixtures were broadly flat, down less than 1% m-o-m, to average just under 3.3 mb/d. Y-o-y, fixtures declined more than 22% or just under 1.0 mb/d.

Sailings and arrivals
OPEC sailings increased 1.4% in December, or 0.29 mb/d, to average 20.76 mb/d, compared with a yearhigh of 25.5 mb/d in April. The increase came as more Libyan barrels became available in the market. Y-o-y, OPEC sailings were 4.1 mb/d, or 16%, lower. Middle East sailings averaged 14.4 mb/d, representing a decline of around 0.3 mb/d m-o-m, or almost 2%. This was down almost 3.1 mb/d, or 18%, compared to the same month last year.

Crude arrivals declined m-o-m in December across all regions except West Asia. Arrivals in Europe led the losses, averaging 10.0 mb/d, representing a drop of almost 3%, or 0.3 mb/d, over the previous month, but were still 1.7 mb/d, or close to 15%, lower y-o-y. Far East arrivals declined by close to 3% m-o-m, or 0.3 mb/d, to average 10.8 mb/d, although this represented a y-o-y increase of 28% or 2.4 mb/d. North American arrivals also fell around 3% m-o-m, or 0.2 mb/d to average 7.4 mb/d. They also saw the largest y-o-y loss of 19% or 1.7 mb/d. In contrast, arrivals in West Asia provided a bright spot, increasing 13% m-o-m, or 0.7 mb/d, to average 6.1 mb/d.

Dirty tanker freight rates

Very large crude carriers (VLCCs)
VLCC spot rates saw some improvement in December picking up from very low levels, supported by gains across all major routes. Spot freight rates rose 24% m-o-m, but still remained 68% lower compared to the same month the year before. Rates on the Middle East-to-East route rose 34% m-o-m in December to average WS35 points. Y-o-y, rates were 69% lower compared with the same month in 2019. Rates on the Middle East-to-West route increased 19% m-o-m to average WS20 points. Y-o-y, rates were down 68%. The West Africa-to-East route experienced a similar increase, up 19% m-o-m to average WS36 points. Rates were 67% lower compared with December 2019.

Suezmax rates experienced mixed movement in December, resulting in average spot freight rates edging up 2% m-o-m on average, the second-consecutive monthly increase. However, they were still 74% lower y-o-y. On the West Africa-to-US Gulf Coast (USGC) route, Suezmax rates averaged WS34 points in December, representing a 6% gain from the month before. Y-o-y, rates were 76% lower than in December last year. The Northwest Europe (NWE)-to-USGC route declined 3% m-o-m to average WS30 points, representing a 71% decline from the same month last year.

Aframax rates were broadly stable in December, edging lower by just 1% m-o-m. Compared to the previous year, however, rates were 71% lower. The Caribbean-to-US East Coast (USEC) route were unchanged m-o-m in December, with rates averaging WS69. Y-o-y, rates on the route were 72% lower.

Developments in the Mediterranean routes continued to diverge slightly. The Cross-Med route declined in December after increasing the previous two months, falling 2% m-o-m to average WS60. In contrast, the Mediterranean-to-NWE route was broadly unchanged averaging WS53, which represented a 71% drop y-o-y. Meanwhile, the Indonesia-to-East route declined 3% to average WS51, which was some 72% lower y-o-y.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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