Freight rates for very large crude carriers (VLCCs) could rise next week on firm sentiment in the Middle East and West Africa markets but higher oil prices and fewer floating storage opportunities could cap increases, brokers said on Friday.
“Middle East rates to the east have crept up one or two points (on the Worldscale measure),” said Ashok Sharma, managing director of BRS Baxi in Singapore.
“Rates are up to W52.50 today. There is a slightly firm undertone,” he added.
Rates from the Middle East are being partly supported by fewer older vessels that would otherwise discount charter rates due to age and plenty of cargoes from West Africa, brokers said.
“Rates from West Africa are showing resilience. Tonnage is a little bit tight,” Sharma added.
Brokers said there was speculation charterers were paying $2.6 million – equivalent to W64 – to fix a VLCC for a crude cargo from West Africa to west coast India for loading at the end of this month.
“In numbers, I would agree rates from the Middle East have been flat. However, sentiment has certainly firmed up,” said a second Singapore supertanker broker, who declined to be named.
“Enquires for Middle East cargoes have remained pretty steady and the amount of available tonnage is tightening up,” the second broker said.
But a perfect storm of rising oil prices, a tightening arbitrage window to transport fuel oil from the West to the East and the traditional lull in trading due to the northern summer is likely to cap freight rate gains, brokers said.
“Rising oil prices has obviously meant the floating storage play has been brought to a halt,” Sharma added.
“Weak supply side fundamentals as well as a seasonal lull in demand are expected to plague the Asian crude tanker market in Q3 2017,” said Rachel Yew, commodity and freight analyst at Singapore’s Oceanfreightexchange in a report on Wednesday.
Around 96 cargoes have been fixed for loading from the Middle East in July with charters for around 25 cargoes still to be arranged, brokers said.
VLCC rates on the Middle East-to-Japan route W51.75 on Thursday against W51.50 the same day last week.
Rates on the West Africa-to-China route rose to W55.50 on Thursday from W55 last week.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia fell to around W91 on Thursday compared with around W100.25 last week.