Tanker Rates Flat During June
Average dirty tanker spot freight rates were broadly flat in June, with ample tonnage availability dampening the impact of increased activity as refineries returned from maintenance, said OPEC in its latest monthly report. In June, Very Large Crude Carriers (VLCCs) edged higher, benefiting from the ramp-up in refinery capacity in China. The Suezmax spot freight rates firmed in June, reversing the losses seen the month before, supported by gains on the West Africa-to-US East Coast (USEC) route. Meanwhile, spot freight rates in the Aframax sector reversed direction with declines on most routes. Clean spot tanker freight rates generally moved lower in June, with only the Northwest Europe (NWE)-toUSEC route showing gains. However, with refineries coming out of maintenance, particularly in Asia, the clean market should start to improve into the second half of the year as preparations for IMO 2020 begin to pick up steam.
Global spot fixtures recovered somewhat in June following two consecutive declines in the previous months, rebounding 17% m-o-m, or 2.8 mb/d, but remained 6% lower than the same month a year ago. The pick-up came as refineries continued to come back from maintenance season, particularly in the Atlantic Basin. In the first half of the year, the strong performances seen in February and March have kept y-t-d levels for global spot fixtures some 13% higher compared to the same period last year. The improvement seen in the first six months of 2019 has been driven by the steady increase in China crude imports, averaging above 10 mb/d over the first half of this year, driven by ongoing refinery expansions, among other factors.
OPEC spot fixtures experienced a recovery in line with global spot fixtures in June, increasing by 15%, or 1.78 mb/d. In the first half of 2019, OPEC spot fixtures were some 10% higher than the same period last year. Turning to the individual routes, fixtures from the Middle East-to-East averaged 6.85 mb/d in June, broadly consistent with the previous month. In the first half of the year, fixtures on the route were 16% higher compared to the first half of 2018. After three months of declines, rates on the Middle East-to-West route rebounded to 1.92 mb/d in June, a gain of 67%, or 0.8 mb/d, but were still below the levels seen last year. This is consistent with the performance on this route in the first half of the year, which was some 22% lower than the same period last year. The drop in crude flows to North America has been one of the key contributors to this decline. Outside of the Middle East fixtures averaged 4.62 mb/d in June, an increase of 0.94 mb/d, or 26%, over the previous month, but were broadly in line with the same month last year. Once again, a high level of activity in February and March – when fixtures reached as high as 6.8 mb/d – resulted in the 1H19 averaging some 15% higher than the same period last year.
Sailings and arrivals
OPEC sailings declined by 0.5% in June, averaging 24.22 mb/d, and were down 1.2% y-o-y. Sailings from the Middle East rose 0.9% m-o-m, representing a gain of around 0.16 mb/d, but were still 1.0%, or 0.18 mb/d, lower compared to the same month last year. Crude arrivals were mixed across regions. Arrivals in West Asia saw the biggest gain, with an increase of 8.7% or 0.39 mb/d. West Asian arrivals showed a similar increase y-o-y. Arrivals in Europe were also higher, up 2.7%, or 0.32 mb/d, but were 1.1%, or 0.13 mb/d, lower y-o-y.
In contrast, arrivals in the Far East fell 4.3%, or 0.4 mb/d, in June, down from the high level seen in the previous month; however, they showed a marginal increase y-o-y. In North America, arrivals fell 3.5%, or 0.36 mb/d, but were 0.7% higher y-o-y.
Dirty tanker freight rates
VLCC spot freight rates edged up in June as the end to spring maintenance across various jurisdictions helped lift activity. However, ample availability kept a lid on rates. Freight rates registered for tankers operating on the Middle East-to-East route rose 12% compared to the previous month to stand at WS44 points in June. Rates benefited from a ramp up of new capacity in China, as well as the gradual return of refineries from maintenance. Middle East-to-West routes in June experienced a gain of 5% m-o-m to stand at WS20 points. West Africa-to-East routes in June also showed gains, increasing 10% from a month ago, to average WS45 points. Despite these increases, VLCC freight rates in June were 12% lower than the same month a year ago.
Suezmax average spot freight rates in June recovered the losses seen in the previous month. The increase came mainly from tankers operating on the West Africa-to-US Gulf Coast (USGC) route, which saw an 18% rise in spot freight rates to average WS65, the same level seen in the same month last year. Despite the increase in activity, the ample tonnage list is likely to weigh on any upward momentum heading into July. Meanwhile, NWE-to-USGC rates declined for the second month in a row; this time by 6% to average WS47 points.
The Aframax sector in June reversed direction, showing declines on most routes. Both the intra-Med and Med-to-NWE fell by 14%, as increased activity was still no match for the ample tonnage list. The Caribbeanto-USEC route declined 3%, falling back from a short-lived rally in May. Meanwhile, the Indonesia-to-East route was unchanged from the previous month.