VLCC spot earnings have fallen by nearly 30% this week as persistently low shipping demand finally takes its toll on owners’ sentiment.
Clarksons Platou Securities assessed global average earnings at $13,300 per day on Friday, down 28.8% over the past week.
Brokers reported slow chartering activity on main trading lanes, with the Middle East Gulf (MEG) market hit particularly hard by Opec’s production reduction.
“VLCC rates are badly hurt by Opec cuts, more than anything else,” Banchero Costa analyst Enrico Paglia said. “The problem is very much demand related, in my opinion.”
S-Oil tentatively fixed the scrubber-fitted, 319,180-dwt Argenta (built 2005) for a voyage from the MEG to South Korea at Worldscale 19.5, according to Tanker International data. The journey involves a loading date between 25 and 29 September.
The rate is about the lowest this year.
The Baltic Exchange estimated spot VLCC earnings on the Gulf-to-China route at $6,100 per day on Thursday, which is a weak level not seen since May 2018.
Average suezmax earnings were assessed at $3,960 per day and aframaxes were estimated at $4,340 per day — both multi-year low levels.
With the current weak charter rates, some analysts have suggested the current oil contango can support more floating storage plays.
Lack of appetite
But few charterers are understood to have been seeking to store more oil at sea in fresh deals.
“The contango is not wide enough and margins not much attractive,” a refining manager said.
Instead, vessel tracking data shows oil firms have apparently opted to delay their destocking of floating storage.
According to Kpler, a total of 155m barrels of crude are in floating storage for seven days or longer as of Friday, little changed from a week ago.
“The usual improvement in crude tanker earnings during the fourth quarter could be less profound than usual,” Clarksons Platou said.
The investment bank added that rates will likely improve only when oil producers hike exports after the destocking process is completed.
“Looking into the fourth quarter, we expect an improvement of crude oil trade will have to wait,” Clarksons Platou said.
