Tanker market turmoil has propelled Clarkson's ClarkSea Index to its biggest ever weekly jump.
In the first week of October, the cross-sector earnings index recorded its biggest ever weekly percentage move, up 23% to $20,096 per day.
And last week, it set another record — gaining 55% to $31,207 per day.
The current spike is tanker-driven, with VLCCs averaging a whopping $307,888 per day following the attack on the 160,000-dwt Iranian suezmax Sabiti (built 1999) off Saudi Arabia on Friday.
The tanker element of the index has soared 323% over two weeks to $80,255 per day, beating the previous all-time high of November 2007.
The average VLCC spot earnings mark has improved by a staggering 516%, from $50,002 per day previously.
Stephen Gordon, managing director of Clarksons Research, said that for some time, its tanker market supply and demand projections have been “encouraging”, with 5% tonne-mile demand growth projected for next year.
Building blocks were in place
This has been boosted by IMO 2020 changes to refinery throughput and oil product trading patterns.
"So, heading into the seasonally strong winter, there were some building blocks for an improving tanker market," he added.
But US sanctions against China's Cosco and also on tankers that have traded to Venezuela have moved things to another level.
"It has been the impact of US sanctions on selected subsidiaries of the world’s largest shipping group and largest tanker group that has sent the market into a frenzied scramble to secure tonnage," Gordon said.
"Further reports of other sanction-related chartering clauses related to Venezuela have added to the confusion, creating additional ingredients for this spike and the bullish position of owners."
All-time high still some way off
Clarksons identified four previous notable spikes that all took place in 2007 and 2008, driven by the tanker market and one by the bulker sector.
One of these, in December 2007, occurred when an already tight market was turbocharged by demand for double hull tankers following a South Korean oil spill, Gordon said.
VLCC rates jumped from $120,000 per day to $230,000 per day in a week.
The ClarkSea Index reached its highest-ever level of $50,714 per day at that point.
"To get to those sort of levels, the tanker market would need much more support from bulkers, containers and gas, although VLGCs have had a positive 2019, with earnings at the highest level since 2015," Gordon added.
The index has risen for five consecutive months for the first time in a decade and has been trending up year-on-year since 2016.
"That seems mundane compared to the past two weeks but perhaps more comforting in the longer term," Gordon concluded.
