Tanker Market on Rollercoaster Mode
The tanker market has had quite a ride during the first month of 2020. According to the latest monthly report from OPEC, issued this week, dirty tanker spot freight rates in January continued the roller coast movement seen since September, this time giving back almost half the gains made in the previous month. However, rates remained some 50% higher than the same month last year, as the market remained optimistic about an improvement in rates in 2020. Seasonal factors were a key contributor to the decline. The outbreak and rapid spread of the Coronavirus temporarily upended the tanker market starting at the end of January, disrupting trade with China, the world’s largest crude importer, and is certain to weigh on rates in February. After rising steadily since September 2019, clean tanker rates fell back in January, but remained slightly higher than the same month last year. Rates benefited from a strong start to the year, but have fallen in recent weeks, driven by seasonal factors.
Global spot fixtures edged down slightly in January, declining around 0.10 mb/d or 0.5% m-o-m, but down 1.6 mb/d, or 8%, compared to the previous year’s levels.
OPEC spot fixtures averaged 12.58 mb/d in January, up 1.4% or 180 tb/d higher than the previous month, but still almost 9% or 1.2 mb/d lower y-o-y. Fixtures from the Middle East-to-East jumped by almost 15%, or 1 mb/d, to average 7.71 mb/d in January, but fell 3% below last year’s level. Middle East-to-West fixtures were sharply lower, down nearly 30% to 1.1 mb/d. Compared to the same month last year, rates on the route fell by over 18% or 260 tb/d. Outside of the Middle East fixtures averaged 3.75 mb/d in January, a decline of 0.5 mb/d, or over 11%, from the previous month, and were down 16%, or 0.7 mb/d, compared to the same month last year.
Sailings and arrivals
OPEC sailings declined by less than 1% m-o-m in January to average 24.93 mb/d. Sailings from the Middle East were 2%, or 120 tb/d, higher to average 18.36 mb/d in January. Crude arrivals were largely positive in January. Arrivals in the Far East increased 3% m-o-m and remained broadly in line with levels seen the same month last year. Arrivals in Europe were up 1% or 140 tb/d higher m-o-m but showed a stronger 9% or 1 mb/d increase y-o-y. Arrivals in North America were broadly unchanged from the previous month but were 12% or 1.3 mb/d lower y-o-y. West Asia was the only route showing a decline, down 200 tb/d or almost 5% m-o-m, but 130 mb/d or 3% higher y-o-y.
Dirty tanker freight rates
Very large crude carriers (VLCCs)
VLCC spot freight rates declined 17% in January, erasing the gains seen in the previous month to stand at WS79 points. The Middle East-to-East route has been up-and-down over the past four months, averaging WS93 points in January. Freight rates registered for tankers operating on the Middle East-to-West routes in January were down 16% m-o-m. At WS53 points, rates on the route were more than twice as high as the same month last year. West Africa-to-East routes in January also showed a similar pattern, down 17% m-o-m to stand at WS90 points, representing a gain of almost 60% compared to January 2019.
Suezmax average spot freight rates edged lower in January, declining 7% following a gain of 36% the month before. Y-o-y, Suezmax rates were 67% higher in January.
Rates for tankers operating on the West Africa-to-US Gulf Coast (USGC) route averaged WS130 points, representing a m-o-m decline of 8% in January. Y-o-y, however, rates were 68% higher in January compared to the same month last year. The Northwest Europe-to-USGC route edged down 3% m-o-m to average WS108 points, which was some 66% higher than the same month last year.
After a strong finish to the year, Aframax rates fell back some 7% to average WS119 points, but remained 42% higher than the same month last year. The Indonesia-to-East route was 18% lower to average WS151 points, but still represented a gain of 35% y-o-y. Both the intra-Med and the Med-to-Northwest Europe routes fell 24% to average WS151 points. Both routes, however, saw y-o-y gains of 15% and 9%, respectively. Only the Caribbean-to-US East Coast route enjoyed a m-o-m increase, up 29% to average WS320 points, which was 90% higher y-o-y.
Clean tanker freight rates
The clean spot tanker market declined for the first time since August, down 19% but still 7% higher than the same month last year. Clean tanker spot freight rates West of Suez averaged WS251 points, representing a decline of 20% since the previous month. The Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe routes saw declines of around 24% to average WS214 points and WS224 points, respectively. Meanwhile, rates on the Northwest Europe-to-USEC route fell 8% to WS165 points. However, rates on West of Suez routes all showed improvements of up to 25% compared to the same month last year. On the East of Suez route, clean tanker spot freight rates fell 17% m-o-m in January to average WS170 points, with the Singapore-to-East route declining 14% m-o-m to average WS152 points, while the Middle East-toEast route declined 20% m-o-m to average WS130 points.