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Tanker Market On Decline During July

The tanker market was in reverse mode during the month of July according to the latest report from OPEC. Dirty tanker rates broadly trended lower across most routes in June, as the stellar rates seen earlier in the year receded. The decline in rates was driven by production adjustments to address the oversupply in the market, increased tonnage availability amid the gradual unwinding of floating storage, and lower import needs globally as product demand remains relatively weak. Similar factors have kept clean spot freight rates muted in June.

Spot fixtures
Global spot fixtures fell further in June, declining by 3.0 mb/d, or 18%, m-o-m to average 13.9 mb/d. Spot fixtures were down by a massive 5.8 mb/d, or 30%, compared with the same month last year. The continued decline came as tanker demand remained weak amid production adjustments by exporting countries, high crude and product inventories weighing on import needs and an unwinding of floating storage which released ships into an already moribund market.

OPEC spot fixtures averaged 9.5 mb/d in June, down 1.5 mb/d or 14% from the previous month and 3.7 mb/d, or 28%, y-o-y. Middle East-to-West fixtures plunged 37% m-o-m in June, extending an even sharper fall the month before. Fixtures on the route averaged 0.65 mb/d, down 1.2 mb/d, or almost 65% lower than the performance seen in the same month last year. Fixtures from the Middle East-to-East fell by 15% or 1.0 mb/d m-o-m to average 5.8 mb/d in June. Y-o-y, this represented a decline of just under 1 mb/d, or 14%. Outside of the Middle East, fixtures were slightly lower, declining by less than 0.1 mb/d, or just under 3% m-o-m, to average 3.0 mb/d. In annual terms, fixtures were down by 1.5 mb/d, or 34%.

Sailings and arrivals
OPEC sailings declined by a further 0.5 mb/d or 2.5% in June, following a drop of 1.8 mb/d the month before. OPEC sailings averaged 21.2 mb/d and declined by 3 mb/d, or 12%, compared with June 2019. Middle East sailings decreased by 0.2 mb/d or 1.4% in June, building on a 1.85 mb/d decline the month before, to average 15 mb/d. This was 2.3 mb/d or 13% lower than the same month last year. Crude arrivals were mixed in June. Arrivals in West Asia increased by just under 4% m-o-m to average 4.7 mb/d, which was only marginally higher than in the previous year. Far East arrivals increased 2% m-o-m to average 8.4 mb/d in June and were 2.7% higher compared with the same month last year. In contrast, arrivals in North America declined 2.5% m-o-m to average 7.65 mb/d; y-o-y, arrivals were 26% lower on the route. After a sharp fall in May, arrivals in Europe were only marginally lower m-o-m in June to average just under 10.0 mb/d.

Dirty tanker freight rates
Very large crude carriers (VLCCs)
VLCC spot rates continued to decline in June, although at a slower pace than in the month before. VLCC rates declined 12% m-o-m on average but were 24% higher than the sluggish rates seen in the same month last year. Rates on the Middle East-to-East route led to m-o-m losses in June, down by 15% m-o-m to average WS52 points, but were still some 18% higher compared with the same month last year. The Middle East-to-West route also showed an m-o-m decline in rates, down by 13% to average WS30 points. However, rates were 49% higher y-o-y. Rates fell on the West Africa-to-East route, decreasing by 9% to WS53 points, but this still represented a gain of 18% compared with June 2019. The decline in rates was driven by production adjustments to address the oversupply in the market, increased tonnage availability amid the gradual unwinding of floating storage, and lower import needs globally as product demand remained relatively weak due to COVID-19 disruptions.

Suezmax
Suezmax rates were further impacted by a sluggish market, with average spot freight rates falling 40% m-o-m on average in June. Y-o-y, rates were 20% lower. Rates for tankers operating on the West Africa-to-US Gulf Coast (USGC) route averaged WS44 points in June, a decline of 42% from the month before. Y-o-y, rates were 32% higher than in June last year. The Northwest Europe (NWE)-to-USGC route fell 38% m-o-m to average WS45 points, representing just a 4% decline from the same month last year.

Aframax
Aframax rates fell by 43% in June and were 27% lower than the same month last year. The Med-to-NWE route decreased 42% m-o-m to average WS56 points, while the Cross-Med route dropped by 41% to average WS63 points.

The Caribbean-to-US East Coast (USEC) route fell a further 45% to average WS68 points in June. Y-o-y, rates on the route declined 22%. The Indonesia-to-East route declined by 44% m-o-m to average WS73 but was 26% higher y-o-y.

Clean tanker freight rates
The clean spot tanker market also experienced declines in June, down 46% m-o-m and 18% y-o-y. On the East of Suez route, clean tanker spot freight rates dropped 59% m-o-m in June and were 19% lower than the same month last year. The Middle East-to-East route led m-o-m declines, falling 67% m-o-m to average WS82 points. Similarly, the Singapore-to-East route fell 50% m-o-m to average WS121. Y-o-y, rates on the route decreased 11%. Clean tanker spot freight rates for West of Suez declined by around 34% in June compared with the previous month and were 18% lower than the same month last year. Rates on the Cross-Med and Med-to-NWE routes fell by 36% and 34%, respectively, to average WS114 and WS124 points. Meanwhile, rates on the NWE-to-USEC route declined by 32% to WS98 points.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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