The seasonal strength that usually boosts the tanker market each winter could fall flat this year, Evercore's Jonathan Chappell said.
The analyst said November's freight forward agreements (FFA) for a VLCC voyage from the Middle East Gulf to the Far East suggest rates of $25,000 per day "right in the sweet spot of the start of the winter trade".
"FFAs are certainly not the best predictive tool for spot rates, but trends and direction help to form a view on sentiment for those intimately involved in the shipping trades," Chappell wrote in a weekly note on Monday.
The $25,000 per day rates, or Worldscale 30, would be an improvement for crude oil tankers, but would still "represent a serious dud for a traditionally robust winter period" with shipowners simply breaking event, he said.
On Friday, the Baltic Exchange quoting that route at WS 28.58, or $10,969 per day on a time-charter equivalent basis.
Overall, VLCC TCE rates were assessed at an average of $3,399 per day.
Rates have been held down all summer thanks to an oversupply of tonnage, a trend that some have argued will only get worse as ships come off floating storage contracts and reenter the active fleet.
Chappell's tepid take comes after Jefferies analyst Randy Giveans dropped target prices and earnings per share estimates for the tanker owners he covers, citing expected weakness in the coming quarters.
Giveans and B Riley analyst Liam Burke predicted strength for the market in the future, thanks to a small orderbook and an ageing fleet shrinking the global fleet as oil demand recovers from the Covid-19 pandemic.
But Chappell said a weak winter could speed up the scrapping many expect to contribute to a stronger market.
"Capitulation may be just what the owners need, though, to start addressing the capacity side of the utilization equation so that an eventual demand recovery can lead to a sustainable cyclical upturn…eventually," he wrote.
