Spot VLCC earnings have collapsed by more than 50% over the last week as fixture activity slowed down sharply.
The drop came after rates surged to record levels a week earlier.
According to shipbroker Fearnleys, time charter equivalent earnings of VLCCs on the Middle East Gulf (MEG)-South Korea route were assessed at $100,500 per day as of Monday morning, a slump from $227,100 per day a week ago.
West Africa slump
VLCC earnings on the West Africa-to-China route dropped to $96,000 per day from $203,000 per day last Monday.
According to brokers and analysts, spot earnings fell sharply as charterers backed off with higher freight rates squeezing refining margins, but sentiments among shipowners remained firm on forecast high Middle Eastern exports.
Brokerage Charles R Weber estimated only 15 fixtures from the MEG last week, compared with a record level of 70 fixtures in the previous seven days.
Among the latest fixtures, Hellenic Tankers’ 306,400-dwt Princess Alexia (built 2004) was provisionally booked by Mangalore Refinery and Petrochemicals on a voyage charter from the MEG to the west coast of India, with a loading date of 1 April.
The fixture was done at nearly WS 134, compared with a similar fixture by Reliance Industries a week ago at WS 400.
The fall came as news emerged that Saudi Arabia capped freight compensation to European buyers due to the earlier spike of VLCC rates, weakening the incentives for refineries maintain imports when domestic oil demand collapsed.
The Opec producer had provided freight rebates to some customers for the transport costs between Ras Tanura in Saudi Arabia and Sidi Kerir in Egypt, Reuters reported.
“Saudi Aramco is limiting freight compensation for European buyers to 10% of the crude’s official selling price,” Braemar ACM said.
“At least five VLCC and five suezmax spot fixtures mostly loading Saudi crude has failed last week.”
However, Saudi Arabia has also vowed to keep its crude output at a record 12.3m barrels per day (bpd) in the coming months, with exports set to exceed 10m bpd from May.
“We expect rates across the board to remain elevated for the next several weeks as more production from the Middle East flows into the market,” Clarksons Platou Securities said.
“The next pivot point is likely to come late next week as Saudi Aramco discloses pricing for its May loading program. We would expect continued price discounts in order to maintain buyer interest for their exports.”
