Spot VLCC earnings in the Middle East have fallen to their lowest in recent memory amid rising bunker costs and weak shipping demand.
The Baltic Exchange estimated time charter equivalent earnings on the TD3C Middle East Gulf-China route at -$5,306 per day on Monday, down from -$3,843 on Friday.
That was also the lowest since the assessment began in February 2017.
The fall came after Yemen-based, Iran-backed Houthi rebels launched a series of drone and rocket attacks on Saudi Arabia’s largest oil export terminal on Sunday.
But brokers said weaker earnings were related to bearish supply-demand fundamentals rather than any potential disruption to Saudi exports.
Ras Tanura has apparently emerged unscathed and no abnormalities were reported.
“The port operation has been normal…[But] the market is very, very bad and I see no signs of change,” said a broker.
“It seems there is not much cargo from the Middle East.”
While freight rates have not decreased much in the past week, TCE earnings have been eroded by rising bunker prices.
Ship & Bunker assessed the average very-low-sulphur fuel oil price in 20 main bunkering hubs at $528 per tonne last Friday, the highest since February 2020.
Also, the forward freight agreement market has seen large sell-offs since most members within the Opec+ alliance decided to extend their supply cuts last week.
The TD3C contract for the second quarter was priced at $4,422 per day on Monday, more than halved from $9,370 on 3 March.
Geopolitical conflicts
Sunday’s incidents took place in and around Ras Tanura and Dhahran against a background of rising tension in the region following alleged Iranian mine attacks on tankers and a car carrier in recent weeks.
The Saudi Arabian energy ministry said a Ras Tanura petroleum tank plant was attacked by a drone from the sea, while shrapnel from a ballistic missile fell near a Saudi Aramco residential compound in Dhahran.
No injuries were reported. Ras Tanura also exports LPG and has a 33m barrel storage capacity.
The terminal ships out all of the country's key crude oil grades, together with clean products.
Bullish oil markets
Brent crude futures briefly rose above $70 per barrel on Monday amid supply fears after the attacks were reported.
S&P Global Platts Analytics observed strong support for dated Brent prices trading in the range of $65 to $70 per barrel.
"Such acts of sabotage not only target the Kingdom of Saudi Arabia but also the security and stability of energy supplies to the world, and therefore, the global economy," the Saudi energy ministry said.
Saudi Aramco has not commented.
Saudi Arabia and Iran are on opposing sides in Yemen's civil war.
A major attack in September 2019 took out 6% of global crude demand — 5.7m barrels per day — when Saudi Arabia's key Abqaiq crude processing plant and Khurais oil field were hit.
