Owners Of Modern VLCCs Could See Rates Blip In Market Under Pressure

Reuters

SINGAPORE, July 28 (Reuters) - Owners of modern very large crude carriers (VLCCs) could see a gain in charter rates amid tightening vessel supply but freight rates, especially for older and newly delivered ships, will remain under pressure, brokers said on Friday.

That came as rates rebounded slightly earlier this week on routes from the Middle East only for them to fall back to last week's levels by Friday.

Rates hit around 53 on the Worldscale measure after Unipec fixed four VLCCs at around W51-52.

"We did see a slight upward correction but rates have fallen off again," said a Singapore-based supertanker broker.

That came after S-Oil and Thai Oil fixed VLCCs at W43 and W44.50 on Thursday.

"W44.50 is a horrible rate," said the Singapore broker.

Freight rates could bounce again as charterers fix vessels to load crude from the Middle East in the last 10 days of August.

"There is a sliver of hope the market that modern tonnage will tighten up," the Singapore broker said.

That came as brokers were busy this week fixing ships to load in the middle of August.

"Owners are slightly optimistic the market will pick up in September which is why they are willing to fix ships for fairly short voyages," the Singapore broker said. "I don't see it myself. Rates in September last year hit the lowest point for the whole year. I think we are in a window of W45-55 until we see a real uptick in October and November."

Overall, the crude tanker market remains under pressure due to tonnage overcapacity, low levels of ship scrapping, oil output cuts by producers and the seasonal summer lull in demand, said Rachel Yew, commodity and freight analyst at Oceanfreightexchange.

Saudi Arabia and the United Arab Emirates said this week they would curb or cut exports in line with OPEC production targets.

"The overall cut in Arabian Gulf crude exports may potentially lead to a month-on-month fall of 6-7 percent in VLCC fixtures (from the Middle East)," Yew said in a report on Wednesday.

The drop in exports is already being felt in the VLCC market as charterers start covering the August program, she added. Asian refiners are expected to continue to import crude from the U.S. and Latin America to offset cuts in the Middle East.


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