Spot earnings of crude tankers collapsed on Tuesday amid oil demand worries in China, the world’s largest seaborne crude importing nation by far.
The Baltic Exchange assessed non-scrubber VLCC earnings on the benchmark Middle East Gulf (MEG)-China route at $18,166 per day, down $8,514 from the day-ago level and the lowest in six months.
Market participants suggested the fall mainly resulted from weakening sentiment, with reports of oil demand reduction in China due to the coronavirus outbreak.
With a sharp slowdown in the country’s economic activity, Bloomberg reported Chinese oil demand has fallen by 3 million barrels per day – or 20% of its total consumption.
Consequently, Chinese refiners are delaying or reducing their crude imports, fearing that downstream demand for petroleum products would stay low for some time.
The tanker market weakness can be attributed to "the sentiment, a lack of cargo volume and many economic negatives," said a London-based broker.
Howe Robinson Partners noted: “There has been no shortage of offers for what limited enquiry we have seen, and for the short term it is difficult to see the light. Time to batten down the hatches.”
Physically, tankers flows to China have yet to show any significant slowdown, though.
“We are unable to confirm any material decrease in Chinese crude imports due to the coronavirus,” Kpler’s crude oil analyst Samah Ahmed said.
“The week to week volatility has been in line with what we typically see for China and there is a seasonal decline in imports due to Chinese New Year.”
However, dampening the sentiment further is the return of Cosco Shipping Tanker (Dalian) Co’s tanker fleet, which includes 26 VLCCs.
The subsidiary of Chinese state giant Cosco Shipping Energy Transportation had been put on the US sanctions list on 25 September for allegedly transporting Iranian oil, but the Office of Foreign Asset Control lifted the sanctions last Friday.
Demand from other countries
In spot trade, some non-China fixtures were reported.
According to Tanker International, Pantheon Tankers Management’s non-scrubber, 319,798-dwt Sea Gem (built 2013) was provisionally booked for a voyage charter from the MEG to Japan by Adnoc Logistics & Services at Worldscale 42.5, with a loading date between 11-13 February.
Similar deals were fixed at about WS 68 a week ago.
Also, Neda Maritime Agency’s scrubber-fitted, 299,323-dwt Arosa (built 2017) was provisionally fixed by S-Oil for a MEG-South Korea voyage at WS 38.5 for loading between 18 and 20 February.
Emails seeking comments from the ship operators and charterers have not been responded at the time of writing.
Scrubber-fitted vessels have been more willing to cut rates amid weakening market conditions, as they can sustain their daily earnings better by consuming the cheaper high-sulphur fuel oil, according to tanker players.
As for the suezmax segment, average spot earnings on the Baltic Exchange fell to $27,425 per day on Tuesday, down $7,741 from Monday. Aframax earnings dropped by $1,499 to $15,905 per day.
