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VLCC Market’s Hopes for Rebound Faded Away

The tanker market and the VLCCs in particular are finding it hard to achieve any sort of meaningful rebound. In its latest weekly report, shipbroker Charles R. Weber said that “rates in the VLCC market commenced the week with the potential for modest gains on a slight improvement in supply/demand fundamentals. This potential quickly evaporated as sentiment reacted to what was a less active week in the Middle East market, which offset any positive sentiment from the fundamentals positioning – as well as any positive impact from a second week of above‐average demand in West Africa. Ultimately, rate progression on AG‐FEAST routes were a mixed‐bag: the AG‐ CHINA route concluded with a very modest uptick while the AG‐JPN and AG‐SPORE routes ended in the red”.

CR Weber noted that “for its part, the surplus projected in the Middle East at the conclusion of the March program is 26 units – a reduction of 7 units, or 21% from February’s observed surplus.Whether this will influence rates to bounce concertedly from current levels yielding TCEs below OPEX remains to be seen. Given the ongoing structural oversupply situation, small changes in the fundamentals immediately facing participants appear to have less of an impact on rate sentiment than the pace of demand. Thus, a robust progression into the April program would represent one of the few possible events on the horizon to influence rates in the coming weeks”.

In Middle East, “rates on the AG‐CHINA route concluded with a 0.5 point gain from last week’s close to ws37.5. Corresponding TCEs gained 6% to conclude at ~$7,766/day.  Rates to the USG via the Cape lost two points to conclude at ws15.5. Triangulated Westbound earnings fell by 16% to conclude at ~$13,385/day”. In the Atlantic Basin, “rates in the West Africa market were soft this week in line with the overall performance of ex‐AG rates. The WAFR‐FEAST route shed 3.5 point to conclude at ws37.5.Corresponding TCEs were off 25% to ~$10,004/day. Rates in the Americas were softer on a growing regional surplus. The CBS‐SPORE route shed $100k to conclude at $3.15m lump sum.  Round‐trip TCEs on the route were of by 9% to ~$13,480/day”, the shipbroker said.

According to CR Weber, “in the West Africa, Suezmax market was largely unchanged this week with rates holding on to gains commanded last week, when demand surged its highest level in over six months. The WAF‐UKC route was unchanged at ws70. Rates could hold at present levels during the upcoming week as charterers work remaining March cargoes, but fresh challenges may accompany an eventually progression into April dates and lead to a fresh pullback. We note that VLCC demand during the March program was at a pronounced low with the class observing the fewest cargoes of any monthly program since November 2016.  In turn, this increased cargo availability for Suezmaxes and supported the rate strengthening the class has recently observed. Early fixture activity for VLCCs in the April program has shown a return to more normalized levels, which implies a fresh decline in Suezmax cargo availability. Elsewhere, Suezmax rates were strengthening in the Americas on lagging influence from the West Africa market and amid sustained demand for Suezmaxes on long‐ haul voyages from the region. The CBS‐USG route added 7.5 points to conclude at 150 x ws67.5 while the USG‐SPORE route added $100k to conclude at $2.35m lump sum”, it concluded.

Finally, in the Aframax segment, “rates in Caribbean Aframax market were correcting from recent highs this week as availability levels loosened on an easing of weather‐related delays. The CBS‐USG route lost 20 points to conclude at ws90. Charterers were keen to see rates break below this level, but with demand this week having proven fairly robust and the CBS‐ USG TCE already having dropped to levels below those in alternative regions, ws90 became the effective floor. We expect rates to hold at this level through the start of the upcoming week”, CR Weber concluded..
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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