Spot earnings of VLCCs on main trading routes were surging further on Friday, with tight vessel supply following the removal of large tonnage from spot trade for floating storage.
According to the Baltic Exchange, the time charter equivalent rates of VLCCs on TD3C Middle East Gulf (MEG)-China route were assessed at $178,993 per day, up a whopping $60,575 from Thursday’s level.
Earnings for MEG-Singapore trade were $185,009 per day, up from $123,239 per day on Thursday. West Africa-China earnings rose to $171,825 per day from $120,621 per day.
The latest VLCC rally began on Wednesday as charterers rushed out to fix VLCCs for loading from the MEG, West Africa, the US Gulf and Brazil next month amid the ongoing price war among oil producers.
“There are just so many cargoes in the market as oil producers are hiking exports,” said a London-based charterer.
A busy week
Data from Tanker International showed at least 49 VLCC fixtures in spot trade this week, compared with 14 fixtures last week. The figures included provisional and failed deals.
As of Friday afternoon, TD3C voyage charters were tentatively fixed between Worldscale 185 and WS 190.
According to the database, Unipec put Athenian Sea Carriers’ 317,441-dwt Athenian Victory (built 2009) on subjects for TD3C trade at WS 185, with a loading date between 19 and 21 April.
Similar deals were done at WS 113 on Thursday.
TradeWinds has approached Athenian and Unipec for comment.
According to tanker players, owners have managed to continue pushing up rates on tight spot supply following a bunch of floating storage deals.
“Traders are taking loads of ships on subjects,” said one of them. “Those aren’t being offered for spot cargoes.”
Market sources — including Fearnley Securities — estimated about 20 VLCCs were provisionally fixed for floating storage after the contango in oil market widened significantly earlier this week.
Oil demand worries
While most believe tanker earnings will stay at an elevated level, there are some doubts over whether the TD3C earnings can make another run at the $250,000-per-day peak hit two weeks ago, though.
“Lots of floating storage and spot fixtures were fixed at strong levels on Thursday and Friday, but they are still on subjects. I think we may not see all of them fully fixed next week,” said the charterer.
“It may be difficult to see the market strengthen further, eating into refineries’ margins when oil demand is weak.”
Global oil demand is set to fall 4.9% in 2020 due to the coronavirus pandemic, with jet fuel, diesel and gasoline hit the hardest, according to Rystad Energy.
The bullish mood in VLCC trade did not spill over to the suezmax, aframax and product tanker segments, which rely more on the West-of-Suez markets.
While average suezmax earnings gained $9,261 to $74,143 per day on Friday, aframax earnings dropped by $332 to $46,842 per day.
On the MEG-Japan route, LR2 earnings were up $162 at $49,538 per day and LR1 up $1,078 at $34,232 per day. The Atlantic triangulation rate for MRs was $26,826 per day, down $729 from Thursday.
Rystad estimated the Covid-19 outbreak would wipe out oil demand totalling 1.8m barrels per day (bpd) in Europe and 2.6m bpd in North America next month.
“Crude demand is falling…[there is] nothing anyone can do,” a tanker owner said.
