1. business and industrial
2. energy
3. oil

CRU
UDE CHRISTMA
AS
5th De
ecember 20
014
Th
he recentt announc
cement by
b OPEC not to reduce
r
production
p
n looks to
o be a big
b
po
ositive for owners. OPECs
O
rec
cent deci sion to ke
eep the ta
aps flowin
ng, meanss it is unlike
ely
that the oill price will exceed
d current levels for some tim
me, punish
hing some
e produce
ers
ard. At the
e same tim
me low oil prices wiill stimulatte consum
mption, ulttimately encouragi
e
ha
ng
crrude movements. In this rep
port we fo
ocus on th
he VLCCs as a keyy driver off the overrall
crrude markket.
20
014 has se
een a marrked impro
ovement in sentime
ent, with many
m
sug
ggesting th
hat we may
ha
ave seen the botto
om of this particula
ar cycle. The fortune
es of the VLCC ow
wner can be
jud
dged from
m the 12 month t//c returns for VLCC
Cs fixed between
b
June 2011 and June
20
014. This average
ed $20,50
00/day, compare
ed to arround $332,500/da
ay curren
ntly
co
ommande
ed by a modern
m
no
on eco un
nit.
Th
he frequent volatilitty of the spot ma rket durin
ng 2014 has
h
signific
cantly inc
creased the
co
onfidence
e of shipowners who
w
have
e been struggling
g with low
w returnss since the
be
eginning of 2011. Owners have
h
as a result sh
hown a greater
g
ap
ppetite to
o take th
heir
ch
hances on
n the spott market to rebuild their war chests bu
ut will this b
be the rig
ght tactic for
20
015? We have seen some VLCC
V
own
ners decid
de that a $30,000
$
p /d level iss the tipping
po
oint for them and have
h
cho
osen to loc
ck in at th
his level fo
or 12 mon
nths t/c. The average
De
ecember 2012 TD3 spot was $24,750/d
day (basiss slow stea
aming). In
n Decemb
ber 2013 the
fig
gure was $
$45,500/day and as of today
y it is $53,0
000/day and
a
weake
kening.
Th
he earning
gs position
n for the owners
o
ha
as of coursse been considerab
c
bly enhan
nced by the
fall in bunke
er prices. In the case of Rottterdam 38
80cst, the price hass fallen 36
6% since the
be
eginning o
of the yea
ar from $5
592/tonne to $373/ttonne tod
day. In thiss scenario
o higher sp
pot
rates may e
encourag
ge ownerss to reversse their su
uper slow steaming
g strategie
es. Howev
ver,
on
ne should
d be awa
are, that abandon
ning this policy
p
co
ould comp
promise the
t
owne
ers’
po
osition.
In the last two yearrs the VLC
CC marke
et has be
een adap
pting to a change
e in trading
pa
atterns ressulting from a decline in imp
ports of crrude to th
he US and
d increasin
ng demand
fro
om the Ea
ast. The lo
onger voyages from
m West Affrica and the Carib
bbean to Asia Paciific
ine
evitably throw up schedulin
s
g issues fo
or charterers with tonnage
t
being out of position
orr in short su
upply. Thiss situation
n is likely to
o be compounded
d next yea
ar with few
wer voyag
ges
ta
aking plac
ce to the
e US whic
ch will ma
ake programming liftings e
ex Caribs even mo
ore
prroblematic
c.
VLLCC newb
building deliveries
d
in 2014 an
nd 2015 ha
ave been
n very muc
ch under control with
w
24
4 being th
he final to
otal for 2014 and a further 23
3 schedulled for 20015. There will also be
so
ome scrap
pping and
d limited conversion
c
ns which will
w help the
t
balan
nce, so the
ese statisttics
loo
ok pretty favourab
ble from the
t
owne
er's standp
point. How
wever, the
e picture changess in
20
016 with ssome 54 deliveries currently
y on the radar, somewhat more sign
nificant. This
T
ye
ear has alsso seen fu
urther con
nsolidation
n of the VLLCC fleet. For exam
mple,
ontline an
nd Tankers Interna
ational en
ntered into a joint venture which en
ncompassses
Fro
so
ome 62 Ta
ankers trad
ding on th
he spot m
market. This equates to apprroximately
y 10% of the
t
cu
urrent flee
et, and an
n even greater sha
are of the
e spot VLCC marke
ket. The th
heory is th
hat
these bigge
er fleets ha
ave greatter barga ining pow
wer to ach
hieve bettter rates.
Th
here has b
been a great
g
deal of discu
ussion abo
out the co
ontango structure in oil pric
ces
wh
hich untill now ha
as not be
een stee p enough to stim
mulate m uch tank
ker storag
ge.
Ho
owever, o
once we have
h
gone
e into 201 5 there may
m
come
e a point w
when the rapid buiildup
p of surplus crude
e in the market
m
w
will open opportunities for ffloating storage. This
T
sc
cenario is a further positive
p
fo
or VLCCs.
In conclusio
on we be
elieve the
e prospec
cts for VLC
CCs and generallyy in the crude
c
sector
loo
ok fairly se
et for 2015
5 to carry on where
e 2014 leaves off.
CRUDE
Mid
ddle Easst________________
____________
wha
at goes up, must com
me down...and event ually
the reverse is true, thoug
gh for VLCC
Cs to turn, and
within only a week is pretty rrare.
turn again w
Cha
arterers starrted the we
eek with en
nough discip
pline
to puncture
p
la
ast week’s rally,
r
but on
nce prices had
mov
ved off some 10 pct, re-entere
ed in suffic
cient
num
mbers to en
ncourage Owners
O
to once
o
again
n set
their sights up
pon regainiing the wss 65/67.5 p
peak
num
mbers that had been
n seen to the East, with
arou
und ws 33 available to the West, via Ca
ape.
Suezzmaxes mo
oved in a more
m
consisstent directiion dow
wnwards. No
ot a comple
ete collapse
e, but levelss did
tumble noticea
ably to 130
0,000 by ws 90 to the East
and
d high ws 50
0’s payable
e to the We
est, though
h the
marrket should move thro
ough a mo
ore level pa
atch
over the next period. Afrramaxes loo
oked as if they
had
d topped a
at ws 140 to
o Singapore
e, and, inde
eed,
the market slip
pped to ws 125 on thin enquiry, and
on looks on
n the
easiier availability. Further deterioratio
card
ds.
We
est Africa
a________________
____________
No relief
r
for Sue
ezmaxes ass last week’s big hit bru
uised
rate
es even furth
her to end at
a 130,000 by
b ws 70/72
2.5 to
the US Gulf w
with only sm
mall premium
ms above that
me explana
ation
anticipated forr European options. Som
oints to the
e fact thatt the
of the lack of enquiry po
r
th
he date w here
fixing window has now reached
CCs had pre
eviously bee
en taken in numbers. O
Once
VLC
thatt window has been hu
urdled, then
n there mayy be
morre opportu
unity for Owners. VLCCs fo
ound
con
ncentrated attention for end Dec/early Jan
posiitions, and that, togetther with th
he u-turn in
n the
AGu
ulf, broughtt rate ideas back up again
a
to aro
ound
ws 62.5
6
to the further Eastt with $5 million+ asked
d for
Wesst Coast Ind
dia.
Me
editerran
nean_____________
___________
Incrreased pa
ain for A
Aframaxes as Charterers
whip
pped rates back down
n to 80,000 by
b ws 90/92
2.5 XMed
d, though that eve
entually provoked more
m
mea
aningful sho
opping, an
nd a trimme
ed tonnage
e list
prov
vides some hope of a degree of re-inflation next
wee
ek. Suezma
axes kicked a few ca
ans, but had to
give
e ground on
n the lack o
of Afra oppo
ortunity, and
d the
rela
ative collapsse in West A
Africa. Ratess from the Black
B
Sea moved off to 140,0000 by ws 82.5 for Europ
pean
destinations, th
hough up to
o $4.6 millio
on was seen on
e
tight, position fro
om the Med
d to China, with
an early,
hea
at.
Ca
aribbean
n_________________
___________
Afra
amaxes sta
arted theirr post-Holid
day camp
paign
whe
ere they leftt off - at 70,,000 by ave
e ws 115 upo
oast,
but then hoped that theyy would ben
nefit from a preChristmas rush ...they we
ere disappo
ointed, and
d the
ek closed at little bette
er than ws 110. VLCCs kept
wee
their tails up with
w
rate de
emands still at around $7.2
million to Singa
apore and $6.5 million
n to West Coast
C
oking North
h Sea list poses
p
India, though a thick loo
me threat to
o the tight local supp
ply as we move
m
som
dee
eper into January.
No
orth Sea_
__________________
____________
Owners managed to pu
ut the handbrake on the
away train, and rates started to creep upw
wards
runa
Cont and 100,000 by ws
to 80,000
8
by wss 105 X - UKC
w 85
from
m the Baltic
c, as Charte
erers started to clear their
pre--Christmas lines. Furth er gains sh
hould be seen.
s
Suezmaxes found more frie
ends for on
nce with easstern
ularly sough t after at up to $4.6 million
m
optiions particu
from
m the Baltic to Singa
apore. Tran
nsatlantic le
evels
varied somewh
hat, but op
perated witthin a ws 60/65
6
ge for the majority. V
VLCCs run through a dry
rang
patch whilst the
t
'arb' e
economics fail to match
Owners' altern
natives from
m the Caribbean… and
ybe even from West Affrica, now.
may
CLEAN PRODUCTS
East______________________________
A tough week for LRs but also one ending in a
slightly more positive mood than when it started.
Rates saw a steady slip all week but tonnage lists
are now looking a little better for Owners and
rates look like then may see a small bounce back.
55,000 mt Naphtha AG/Japan is now at ws 110
and 65,000 mt Jet AG/UKC is $1.85 million. LR2s are
also down on the week with 75,000 mt Naphtha
AG/Japan at ws 105 and 90,000 mt jet AG/UKC at
$2.75 million. But once again these rates may see
slight improvements next week.
MRs began the week with a heavy front end
position list, but have really thinned out and the
shorthaul market is firming as the week draws to
an end. TC12, as usual, has not been affected
and remains 35 x122.5-125 levels, although you
would expect Owners to try and push this for 2nd
half December lifting’s. East Africa and South
Africa has seen a lot of activity and most this was
covered before the shorthauls firmed, hence rates
actually came off and ws 148 is on subs, that is a
12 point drop over the week. AG to the UKC has
been fixing at $1.25 million, but there aren't too
many Owners remaining who are willing, next
done is expected to closer $1.3 million. The
shorthauls have done a complete U-turn, with
Jubail/Jebel Ali firming to $265,000, which was a
$55,000 jump in under 24 hours, Owners are now
talking in excess $300,000. With the prompt
position cleared out, next week should see the
MRs firm, but with a weak LR1 market, these will
compete for the shorthaul cargoes, given current
levels.
The theme for this week in North Asia this week has
been
one
of
downwards
adjustment,
unfortunately for Owners. At the end of last week,
a decent flow of cargoes combined with positive
Owner sentiment drove the market up, but this
week, cargo volume has dwindled and at the
time of writing $510K is on subjects for MR
Korea/Singapore – a $40K drop on last done,
which, in terms of Far East mentality, is a big
correction. This is also largely due to pressure from
the weaker LR1s, which in many cases are
cheaper than the MRs, and some Owners would
realistically do low $500K levels now. The
Singapore market, against the odds, has
managed to hold fairly steady and that now the
WCI-AG MR market looks more positive, it should
stay stable next week. Singapore/Australia is fixing
at 30kt x ws180 levels right now.
Mediterranean____________________
An active week for the most part and Handy rates
remain buoyant with the West Med settling close
to 30 x ws 210 with positions tighter than the East
Med, which as a result has been softer fixing in the
30 x ws 200-205 bracket. Black Sea has been
relatively quiet for exports and a few specific
deals concluded 30 x ws 190-195, but more widely
considered 37 x ws 200-210 depending dates. MRs
have seen a positive number of Med enquiries,
but due to all the ballasting ships TA rates have
been slipping and remain under pressure with 37 x
ws 180 last done from UKC and considered similar
from the Med. West Africa premiums are being
tested in light of a falling TC2 market, but a rising
USG market and last done ex UKC 37 x ws 205
levels, would suggest similar for a Med load.
Markets East of Suez showing some signs of
improvement, but the West remains a better
prospect so this route is very Owner dependent,
last done to Redsea around $1.1-1.2m.
UK Continent_____________________
A real slow off in demand for Flexis through to MRs
this week on the Cont. Rates have subsequently
slipped across the board as the tonnage lists
lengthens. TC2 has now slumped to 37 x ws180
and with more ships now appearing on the list we
expect rates to come under further pressure. West
Africa also slips to 37 x ws 205, although with the
USG firing West Africa rates likely to stay firmer.
Flexi's and handies have a slow week, 22 x ws 240
still the conference rate and 30 x ws 190 levels on
the handies. LRs on the other hand have yet
another strong week. A slow start on the LR1s but
the list tight enough to keep rate at 60 x ws150
levels as cargos trickled in. Nap still in strong
demand to the East, with a number of LR2s being
worked for Med / East - $2.9-3.0m levels are still
being achieved.
Caribbean________________________
What a week for the USG. After a number of
"nearly" weeks with a tight list but not enough
cargos, the ULSD arb finally swung open, and
rates reacted accordingly. From LR2s to MRs,
vessel’s were in demand and Owners made the
most where they could. 38 x ws160+ now for TC14
and the possibility to firm further, USG/Brazil
trading firm up at 38 x ws190. LRs have been a
talking point the Gulf, as LR2s now being paid 80 x
ws100 for USG/TA and LR1s $2.5m going East.
DIRTY
Y PRODUCTS
Handy______________________
_________
__
Stea
ady is the
e most applicable adjective
e to
desscribe the U
UKC marke
et this wee
ek; consiste
ently
low
w level inqu
uiry has made
m
a relatively sim
mple
task
k of picking
g off the naturally po
ositioned sh
hips.
Thus, in turn, rrates have
e flattened
d at ws 15
55 XUKC
C with little
e positive stimulation to move ffrom
this point. UK
KC - Med will remain compettitive
while the Med
d sits 20 points
p
highe
er . Med sships
will be less likkely to ballast to the
e UKC; loo king
furth
her forwarrd this shou
uld create a shortag e of
unitts in the UK
KC so keep
p an eye on dates ass we
n mov
ve closerr to the
e Christma
as season
trad
ditionally fo
orward fixin
ng occurs.
Med
d rates clo
ose the week 10 poin
nts up ex B lack
Sea
a with th
he prope
ensity to firm furtther.
Con
ndensed inquiry allied with a shortage
e of
vesssels with re
eliable itine
eraries has led to the bull
run on ratess.
Forwa
ard fixing is occurrring
con
ntributing tthe growin
ng hype su
urrounding the
fixin
ng window
w up to 17tth. Taking a ship witth a
second voya
age option
n should be
b more o
of a
con
nsideration
n in the current market
m
tre
end.
Expect ex Bla
ack Sea to move above
a
ws 200
nexxt week a
and it will naturally drag X-M
Med
num
mbers with it.
The traditiional 10p
point
next
diffe
erential will be wide
ened at the
e start of n
wee
ek with X-M
Med laggin
ng behind.
MR
R________
_________
_________
________
As suspected
d, last we
eeks Afram
max flurry was
likely to be only
o
short liived, and with Aframax
rate
es tumbling it was only a matter
m
of time
t
beffore their smaller
s
co
ompanions followed suit.
How
wever as the wee
ek progre
essed roa
aring
inqu
uiry from the Blackk Sea natturally rela
ayed
onto the MRss causing a new rising cycle and
figh
ht back, albeit a sma
all one. How far thiss will
go remains to
o be seen b
but with fo
orward fixin
ng in
the back of our mindss we expe
ect growth
h to
con
ntinue pulling the Easst Med alo
ong with it. The
West Med and Contine nt doesn't seem to have
h
a generic
g
fixing level w
which leaves the doors
ope
en for both
h Owners a
and Chartterers to ba
attle
out each voy
yage indiviidually. Furrther inquirry as
we run down
n into Ch ristmas will be the real
gam
me chang
ger otherw
wise we expect
e
a little
surp
prise in this market.
Panamax__________________
__________
Afte
er a week that startted on a back
b
foot, the
sub
bsequent finish to the
e week be
egins to le
eave
Ow
wners with a lifted outlook on
o what iss to
follo
ow. Activ
vity over in
n the US has made
e an
imp
pact to the
e availabilitty of units where at time
t
of writing
w
leve
els approac
ch the 50/150 mark, and
it’s here in th
hat leavess the mark
ket ponde
ering
the next mov
ve! Any ssubsequen
nt reliance
e on
ballast tonnage from th
he US is lik
kely to be met
with
h inflated id
deas cove
ering ex UK
KC.
Dirty Tanker Spot Market Developments - Spot Worldscale
wk on wk
Dec
Last
Last
FFA
change
Week
64
Month
56
Q1 15
50
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
-4
4th
60
-16
80
96
83
84
TD7 Aframax N.Sea-UKC
-7
102
109
107
110
Dirty Tanker Spot Market Developments - $/day tce (a)
wk on wk
Dec
Last
Last
FFA
change
Week
62,000
Month
48,000
Q1 15
42,500
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
-2,250
4th
59,750
-9,500
38,250
47,750
36,500
46,750
TD7 Aframax N.Sea-UKC
-3,750
26,750
30,500
27,500
31,500
Clean Tanker Spot Market Developments - Spot Worldscale
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Dec
Last
Last
FFA
change
Week
113
Month
128
Q1 15
-5
4th
108
-39
189
229
140
133
-6
112
118
134
103
-3
180
183
181
Clean Tanker Spot Market Developments - $/day tce (a)
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Dec
Last
Last
FFA
change
Week
28,500
Month
35,000
Q1 15
+0
4th
28,500
-7,750
29,750
37,500
16,500
16,500
-250
20,250
20,500
25,500
17,000
+750
19,250
18,500
18,250
(a) based on round voyage economics at 'market' speed
LQM Bunker Price (Rotterdam HSFO 380)
-43
370
412.5
436.5
LQM Bunker Price (Fujairah 380 HSFO)
-50
413
462.5
470
LQM Bunker Price (Singapore 380 HSFO)
-44
419
462.5
460.5
MR/JH/JD/DP/SLK
Produced by Gibson Consultancy and Research
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