DNB Markets is expecting the traditionally strong winter season for the VLCC market to fall short of investors' expectations.
VLCC spot rates have crashed from $60,000 per day last December to around $12,000 per day this month, noted analyst Nicolay Dyvik in a video update on the market.
“We argue that winter season could disappoint,” he said, noting his forecast of $22,000 per day for VLCCs in the final three months of 2017.
“Rates could double from current lows and still be within our forecast,” he said.
“We clearly believe it will disappoint buy side and sell side expectations.”
Dyvik says the decline in rates is due to lower shipments from the Middle East and fleet growth, which hit a 40-year high in April.
“At the start of 2018 [fleet growth] is going to level out at just shy of 5%, which we argue is too high for freight rates to pick materially up from current levels,” he said.
DNB Markets presently has a forecast of $25,000 per day for VLCC spot rates next year.
Further supply pressure is likely to come from a reduction in floating storage, while the 17 million plus deadweight added to the tanker newbuilding orderbook in the first seven months of 2017 is also seen as a cause for concern.
“It’s a meaningful number and not what the market needed,” Dyvik said.
