Tanker Market In April Still in Decline
Average dirty tanker spot freight rates in April continued to decline from the high levels seen at the end of last year. Fixtures were lower on seasonal factors with the start of refinery maintenance particularly pronounced this year as refiners gear up for the implementation of IMO 2020. Fleet growth weighed on the market as healthy freight rates in recent quarters discouraged scrapping and deliveries were concentrated in the 1H19, boosting availability. In April, dirty tanker freight rates for VLCCs and Aframax fell on average by 30% and 13%, respectively compared to March, although this was partially offset by a 13% rise in Suezmax rates supported by West Africa-to-US Gulf Coast (USGC) activity. Clean tanker spot freight rates continued to show mixed performance in April, resulting in an average 1% decline in rates compared to the previous month. East of Suez, clean spot freight rates weakened due to declines on the Middle East-to-East route, while West of Suez rates showed some improvement, supported by gains within the Mediterranean and Mediterranean to Northwest Europe (NWE).
After a strong first quarter, global fixtures fell back in April by 33.2% m-o-m, or 9.5 mb/d, from the high levels seen in the previous two month. However, the drop was only 3.1% from the same month a year ago. OPEC spot fixtures saw a proportional decline of 33.4%, or 6.60 mb/d, from the high levels in February and March, to average 13.18 mb/d.
Fixtures on the Middle East-to-East route averaged 6.86 mb/d in April, broadly in line with last year, but down almost 38% m-o-m from the high levels seen in the previous two months. The Middle East-to-West route continued the decline seen in the previous month, down around 11%, to average 1.79 mb/d. This was 28% lower y-o-y. Outside of the Middle East, fixtures averaged 4.53 mb/d in April. This represents a decline of 33% from the high levels seen in the previous month, albeit a gain of almost 8% y-o-y.
Sailings and arrivals
OPEC sailings were 1.1% higher m-o-m in April, averaging 24.67 mb/d, which represents a similar increase y-o-y. Sailings from the Middle East fell 5.5% m-o-m, representing a decline of around 1 mb/d, but were down just 1.2%, or 0.2 mb/d, compared to the same month in 2018.
Crude arrivals increased in all areas except Europe, where they declined by 3% or just under 0.4 mb/d m-o-m. European arrivals were down 7%, or just under 0.9 mb/d, y-o-y. Elsewhere, arrivals in North America continued at the strong levels seen in March, edging up to 10.7 mb/d. Arrivals in Far East and West Asia ports increased by 1.7% and 3.7%, respectively, from a month ago. Arrivals in the Far East recovered after falling over the previous two months, while it was the thirdconsecutive monthly build for arrivals in West Asia.
Dirty tanker freight rates
Very large crude carriers (VLCCs)
After a tentative recovery in March, VLCC spot freight rates fell back in April. Rates were pressured by a lower number of cargoes, as well as seasonal factors heading into the lower demand second quarter. Freight rates registered for tankers operating on the Middle East-to-East route declined by 33% compared to the previous month, to stand at Worldscale (WS) 40 points. Middle East-to-West routes in April experienced a decline of 30% m-o-m to stand at WS21 points. West Africa-to-East routes in April also fell back, dropping 26% from a month ago, to average WS43 points. Despite these declines, VLCC freight rates in April were broadly in line with those seen in the same month a year ago.
Suezmax average spot freight rates saw a slight recovery in April, after falling the previous four months from the high levels achieved in November 2018. The increase came mainly from tankers operating on the West Africa-to-USGC route, which saw an 8% increase in spot freight rates to average WS51 points. The improvement in spot freight rates out of West Africa came from an influx of cargoes, although quiet markets elsewhere weighed on sentiment. NWE-to-USGC also provided some support, with an increase of 1% to average WS98 points.
The Aframax sector in April continued to witness the declines seen on most routes since the start of the year, with only Indonesia-to-East showing a minimal increase.