Freight rates for very large crude carriers (VLCCs), which plunged to a three-week low, are set to recover next week as owners hold out for higher rates on expectations of firm cargo volumes from the Middle East, ship brokers said on Friday.
“Owners, especially those with modern vessels are now holding out as they view the market is definitely going to firm up,” said a Singapore-based supertanker broker. That came after China National Offshore Oil Corporation fixed the 1998-built 311,189 dwt (deadweight tonne) VLCC Front Century at 56 on the Worldscale measure, equivalent to around $36,000 per day.
“Owners feel fixing such an old ship at that rate has drawn a line in the sand and rates for modern tonnage will be higher,” said a European supertanker broker. Rates slumped earlier this week as charterers picked off older vessels or newly delivered ships from shipyards and dry-dock because owners needed immediate employment for the vessels, brokers said. Thinner cargo volumes from Basra and West Africa, where there are 10-15 fewer fixtures for November loading, also weighed on the rates, brokers said.
That came as crude oil exports from Iran are set to drop 5 percent in November to a four-month low, a source with knowledge of the preliminary tanker schedule said. Around 55 cargoes have been fixed so far for loading in the Middle East in the first 20 days of November, while a further 25-30 cargoes are expected to be fixed up to Nov. 20, said Ashok Sharma, managing director of shipbroker BRS-Baxi Far East in Singapore.
There are around 40-45 ships available for charter, he said. “I think the market will be steady while there is a potential for it to come back,” he said, adding there is a speculation that rates could surge to W75 in the next few weeks. Floating storage also could be making a comeback with seven VLCCs fixed this week for short-term charter of five to six months mostly around Singapore, Sharma said.
VLCC rates from the Middle East to Japan dropped to W55.50 on Thursday from W67 on the same day last week. They hit W55 on Wednesday, the lowest since Oct. 5. Rates for VLCCs from West Africa to China fell to around W62.25 on Thursday against last week’s W67.50. They slipped to around W62 on Thursday, the lowest since Oct. 7. “Owners are clearly expecting rates to be firm throughout the winter. Therefore, West Africa-Asia rates have not corrected nearly as much as in the Middle East,” Norwegian ship broker Fearnley said in a note on Wednesday.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to W94.25 on Thursday from a near W98 on the same day last week on weaker cargo volumes.
Source: ReutersPrevious Next
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