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Tanker Market in “Lethargic” Mode During September

The tanker market’s performance during the month of September was lackluster to say the least. In its latest monthly report, OPEC said that dirty tanker rates remained lethargic in September, as tonnage demand continued to be weak and the unwinding of floating storage increased availability. After three spectacular quarters in 2020, ship owners are expecting a slow fourth quarter for tanker demand and an uncertain outlook for the coming year. Clean tanker rates provided the only bright spot in September, with rates picking up due to a surge in rates in the Mediterranean amid temporarily low tanker availability in the region at the start of the month.

Spot fixtures
Global spot fixtures declined m-o-m in September, falling by 0.4 mb/d, or close to 3%, m-o-m to average 13.8 mb/d. The decline comes as a build-up in inventories earlier in the year weighed on crude trade flows and as the impact on tonnage demand was further exacerbated by historic supply adjustments. Spot fixtures were some 5.7 mb/d, or 29%, lower than the same month last year.

OPEC spot fixtures averaged 9.6 mb/d in September, edging up around 1% m-o-m, but still some 3.6 mb/d, or 27%, lower compared with the same month last year. Fixtures from the Middle East-to-East picked up further in September, rising by 3%, or 0.2 mb/d, m-o-m to average 5.8 mb/d, amid continued strong inflows, particularly to China. Y-o-y, this represented decline of 2.3 mb/d, or 29%. In contrast, Middle East-to-West fixtures dropped by 0.3 mb/d, or 26%, m-o-m in September, as refinery runs remain depressed in the Atlantic Basin due to high product inventories and some lingering storm disruptions. Fixtures on the route averaged 0.8 mb/d, down 0.3 mb/d, or 30% mb/d, compared with the same month last year. Outside of the Middle East, fixtures rose by 0.2 mb/d, or 8%, m-o-m to average just under 3.0 mb/d. In annual terms, fixtures were down by 0.9 mb/d, or 23%.

Sailings and arrivals
OPEC sailings edged by less than 1% m-o-m, in September, averaging 20.1 mb/d, compared with a high in April of 25.5 mb/d. This slight increase was due to the return of some additional adjustments to the market, partly offset by compensatory reductions by other producers. Y-o-y, OPEC sailings were 4.3 mb/d, or 18%, lower. Middle East sailings averaged 14.3 mb/d, representing a decline of 0.2 mb/d, which was more than 1% m-o-m, but a decline of 3.6 mb/d or just shy of 20% y-o-y. Crude arrivals were mixed in September. Arrivals in West Asia saw the biggest m-o-m increase in percentage terms, rising by 0.2 mb/d, or around 4%, m-o-m to average 4.7 mb/d. Far East arrivals rose by 0.2 mb/d, or 2%, m-o-m to average 8.4 mb/d in September. North America led declines in September, falling by 3%, or 0.2 mb/d, m-o-m to average 7.7 mb/d, impacted by hurricane disruptions on top of already low refinery runs. Arrivals in Europe declined by less than 1%, or 0.1 mb/d, m-o-m to average just under 10 mb/d. Y-o-y, arrivals were 17% lower on the route.

Dirty tanker freight rates
Very large crude carriers (VLCCs)
VLCC spot rates continued to edge lower in September, slipping by 8% m-o-m on average, as tonnage demand continued to be weak and the unwinding of floating storage increased availability. Preliminary indications point to a continued decline in October and a soft outlook for the final quarter of the year, after a very profitable first half of the year. Rates on the Middle East-to-East route fell a further 8% m-o-m in September to average WS30 points. Y-o-y, rates were more than 50% lower compared with the same month last year. The Middle East-to-West route was also 8% lower m-o-m to average WS21 points. Y-o-y, rates were 31% lower. Rates also dropped on the West Africa-to-East route, decreasing by 7% m-o-m to average WS34 points and down 46% compared with September 2019.

Suezmax rates declined in September, with average spot freight rates dropping 19% m-o-m on average in September. Rates were 46% lower y-o-y. Suezmax demand remained muted during a period when activity normally starts to pick up due to seasonal factors. On the West Africa-to-US Gulf Coast (USGC) route, Suezmax rates averaged WS32 points in September, down 23% from the month before. Y-o-y, rates were 53% lower than in September last year. The Northwest Europe (NWE)-to-USGC route fell by 15% m-o-m to average WS32 points, representing a 36% decline from the same month last year.

Aframax rates declined in September, down by 7% m-o-m, and lower by 47% y-o-y. Overall, activity remained sluggish, weighing on rates amid ample availability. The Caribbean-to-US East Coast (USEC) exhibited the largest m-o-m losses in percentage terms, declining by 18% to average WS57, some 58% lower y-o-y.

The Mediterranean-to-NWE route declined by 5% m-o-m to average WS53, while the Cross-Med route fell a similar 5% m-o-m to average WS57. Y-o-y, rates were around 50% lower on both routes. The Indonesia-toEast route edged down 1% m-o-m in September to average WS70 and was 24% lower y-o-y.

Clean tanker freight rates
Clean spot freight rates were the only bright spot in September, showing a 16% improvement m-o-m, while still remaining 7% below the same month last year. Gains were due solely to clean spot freight rates West of Suez, where they were up 32% m-o-m in September and were 15% higher y-o-y. Rates on the Cross-Med and Med-to-NWE routes jumped 52% and 45% m-o-m to average WS125 and WS135 points, respectively, due to low availability in the region early in the month. Meanwhile, rates on the NWE-to-USEC route contributed a slight gain of 2% m-o-m to average WS99 points. In contrast, clean tanker spot freight rates East of Suez dropped by 8% m-o-m in September 2020 and were 35% lower compared with September 2019. The Middle East-to-East route declined by 15% m-o-m to average WS72 points. The Singapore-to-East route edged down by 2% m-o-m to average WS90. Y-o-y, rates on the route were 35% lower.

Nikos Roussanoglou, Hellenic Shipping News Worldwide


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