VLCC earnings fell to lows not seen since October 2014 as Saudi Arabia said it cut exports to the US and vessel supply weighs on market sentiment.
The Baltic Exchange's index of spot VLCC earnings ended the week just over $5,600 per day, a 42% drop for the week.
The brunt of Opec cuts appear to be hitting the market, particularly west of Suez. Saudi Arabia's energy minister told news outlets that it cut exports to the US by some 300,000 barrels per day in March.
VLCCs earnings for the TD1 route from the Middle East Gulf-to-US Gulf continued to be assessed at negative earnings as front-haul cargoes were limited and ships had to ballast west for Caribbean and US Gulf cargoes.
Euronav chief executive Paddy Rodgers also sees this month as the weakest in the first quarter. He told TradeWinds at the sidelines of this week's Connecticut Maritime Association Shipping 2017 meeting: "Fixtures weren’t down in January and February, but they may come off a little bit now."
Vessel supply weighs on market sentiment. Rodgers estimates 16 VLCCs have been delivered year-to-date and another 30 are yet to be delivered.
He says other crude oil flows out of the Atlantic Basin are offsetting some of the Middle East Gulf weakness. West Africa has seen some gains in VLCC loadings, Rodgers says. Unipec put the 301,000-dwt BW Bauhinia (built 2007) on subs Friday for the West Africa-to-China voyage. The US is also seeing more cargo activity, he noted.
"We’re actually seeing a significant amount of cargo volume going from the US Gulf to China," Rodgers said. "Shale oil being loaded and exported to China. Within our group we've done eight (cargoes), and I think there’s been at least double that (with other owners)."
Given the other cargo sources, Rodgers says owners should not capitulate much further rates, despite more vessels joining the fleet.
"The market remains relatively balanced, which is why, although I think it will get softer in Q2, we don’t need to be completely anxious about it," Rodgers said
