China’s coronavirus epidemic and rumoured sanctions relief for Cosco Shipping Tanker (Dalian) have weighed on sentiment among VLCC players despite unseasonally high spot earnings.
Average spot earnings for non-scrubber units were assessed by Clarksons Platou Securities at $65,800 per day as of Thursday morning, down from $69,500 a day ago.
For scrubber-fitted VLCCs, earnings dropped to $85,100 per day from $89,300.
Brokers reported the 316,000-dwt Desh Vibhor (built 2015) was provisionally booked at Worldscale 85.5 and the 297,300 FPMC C Noble (built 2012) was chartered at WS 86, both on Middle East Gulf-Taiwan voyage charters with loading dates between 8 and 9 February.
Similar deals were done at about WS 89 earlier this week.
Further falls in VLCC earnings are likely as the outbreak of the deadly coronavirus virus in China is set to dampen oil demand, according to some market sources.
“The market is coming off for sure,” one of them said.
Since the virus was first found in Wuhan in December, a major transport hub in central China, Chinese healthy authorities have reported more than 600 confirmed cases and at least 17 deaths. Isolated cases are reported in Hong Kong, Macao, Taiwan, the US, Japan, South Korea and Thailand.
Health officials fear the virus could spread farther afield, given heavy travel during the Lunar New Year holiday. The Chinese government has ordered lockdown on Wuhan and two nearby cities.
Oil demand impact
Cited by Bloomberg, estimates of Goldman Sachs suggested the outbreak could lead to a fall of 260,000 barrels per day in global oil demand this year.
A survey of S&P Global Platts showed China’s overall oil product consumption could ease by 2% to 8% from the year-ago level in January and February.
“I haven’t heard any impact on physical flows to China yet, but the epidemic is something that hurts VLCCs from the macro, demand sides,” said a Chinese refining source.
In addition, there have been talks that the US will lift sanctions on Cosco Dalian by next week since Washington and Beijing have reached a so-called phase-one trade agreement.
One of tanker owner Cosco Shipping Energy Transportation’s main subsidiaries, Cosco Dalian was put on the sanctions list for allegedly transporting Iranian oil on 25 September.
Since then, the company’s fleet of 42 tankers, including 26 VLCCs, has been mostly kept out of international trading.
Emails seeking comments from Cosco and the US government on the sanctions relief have not been responded at the time of writing.
Analysts suggested the return of Cosco fleet would result in higher vessel supply at a time when refinery demand is falling seasonally.
“If the sanctions are lifted, we estimate the negative rate impact to be approximately $15,000 to $20,000 per day from today’s fleet utilisation levels,” Clarksons Platou said.
