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Tanker Markets Still Looking for Sustainable Recovery

The tanker market in April was still in backwards mode. In its latest monthly report, OPEC said that dirty tanker rates declined in April, as the improvement seen in March in the Suezmax and Aframax classes proved temporary and VLCCs rates moved sideways. Rates fell as gains in the Atlantic Basin triggered by the fallout from the February big freeze in the US Gulf Coast (USGC) unwound. Clean rates rose across the board, except on the NWE-to-US East Coast (USEC) route, where rates fell back from the relatively strong levels seen in the prior two months. Dirty tanker rates are not expected to pick up until 2H21 or 2022, with the latter date more likely. The outlook for clean rates, however, is slightly more positive.

Spot fixtures
Global spot fixtures declined m-o-m in April, falling by almost 2.0 mb/d, or over 12%, to average 14.3 mb/d. Spot fixtures were around 6.5 mb/d, or 31%, lower than the same month last year. The decline came amid continued sluggish tanker demand due to an ongoing destocking globally, and as tanker availability remained high amid lower-than-expected scrapping.

OPEC spot fixtures fell m-o-m in April, down by almost 1.0 mb/d, or 9%, to average 9.59 mb/d. Compared with the same month last year, OPEC spot fixtures were over 34% lower, down by 4.9 mb/d. Fixtures from the Middle East-to-West provided a bright note, averaging 1.0 mb/d in April, representing a jump of close to 43% m-o-m, or 0.3 mb/d. Y-o-y, the route saw a decline of 1.9 mb/d, or almost 65%, from the strong levels seen in April 2020. Separate Vortexa data shows the m-o-m increase was driven by flows to the US Gulf that grew sharply in March and April ahead of the driving season and as flows to the Med remained high relative to recent months. Middle East-to-East fixtures fell by 15%, or more than 0.9 mb/d m-o-m, to average around 5.2 mb/d. This was almost 3.0 mb/d, or 37%, lower than in the same month last year. Outside Middle East fixtures fell by almost 0.3 mb/d, or close to 9% m-o-m, to average 3.4 mb/d. Y-o-y, fixtures were down by just over 2%, or less than 0.1 mb/d.

Sailings and arrivals
Sailings were broadly unchanged in April from the previous month, with OPEC sailings averaging 21.5 mb/d. Y-o-y, OPEC sailings were down 4.0 mb/d, or almost 16%. Middle East sailings edged marginally higher, averaging 15.6 mb/d. Y-o-y, sailings from the region were down 3.2 mb/d, or 17%, compared with the same month last year.

Crude arrivals were higher m-o-m on all routes in April, except in Europe. Arrivals in West Asia rose 0.2 mb/d, or close to 4%, to average 6.4 mb/d. Y-o-y, West Asia arrivals were 2.1 mb/d, or 47%, higher. Arrivals in the Far East increased 0.5 mb/d, or just under 5%, to average 12.4 mb/d. This was 4.3 mb/d, or 53%, higher than the same month last year. Arrivals in North America averaged 8.4 mb/d, representing a gain of 0.3 mb/d, or around 4%, and a 0.5 mb/d, or over 6%, increase y-o-y.

Dirty tanker freight rates
Very large crude carriers (VLCCs)
VLCC spot rates remain at low levels, despite rising 5% m-o-m. They are 77% lower than the same month last year, when a surge of supply onto the market swept up tanker availability and pushed rates to multi-year highs. The improvement came amid higher flows to Asia targeting the end of maintenance, as well as higher flows on VLCCs to North America and Europe to a lesser extent, as these markets are seeing signs of a recovery from COVID-19 impacts. Ample availability, however, capped gains. Rates on the Middle East-to-East route led gains, increasing 11% m-o-m to average WS34 points. Y-o-y, rates were 78% below the same month last year. Higher rates were supported by an increase in flows to China and South Korea, offsetting declines in Japan and India, according to Vortexa data. Rates on the Middle East-to-West route edged up 3% m-o-m to average WS23 points in April. Y-o-y, rates were 78% lower. The increase in rates were driven by a jump in departures to the USGC, which expanded sharply for the second month. The West Africa-to-East route remained flat m-o-m in April at WS36. Rates were 76% lower compared with April 2020. The sluggish performance came amid lower demand for VLCC flows to India and Thailand.

Suezmax
Suezmax rates gave up the gains seen in March, declining 19% as a number of disruptions supporting the market continued to unwind. Compared with the same month last year, average Suezmax rates were 61% lower. On the West Africa-to-USGC route, rates average WS54, a decline of 14% compared to the month before. Y-o-y, rates were 62% lower than in April 2020. Meanwhile, spot freight rates on the USGC-to-Europe route fell 25% m-o-m to average WS45 points. This was 60% lower compared with the same month last year.

Aframax
After an improved performance in March, Aframax rates declined by 27% m-o-m in April. This was 44% lower than the same month last year. The declines came as upward pressure on rates from disruptions in the USGC dissipated. The biggest decline was in the Caribbean-to-USEC route, which dropped 34% m-o-m to average WS91. Y-o-y, rates on the route were 40% lower. Med routes also experienced strong declines m-o-m in April, after increasing over the first quarter of this year. Both routes declined 30%, with the Mediterranean-to-Northwest Europe (NWE) route averaging WS85 and the Cross-Med route averaging WS87. Compared to the same month last year, the routes were 44% and 43% lower, respectively.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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