Geopolitics are pushing VLCC spot rates towards $100,000 a day, as charterers work around the clock to snap up tonnage in a red hot market.
The attacks on Saudi oil installations last month, combined with US sanctions on Cosco’s tankers 11 days later have sent the supertanker sector soaring with spot rates for some routes now in excess of $70,000 a day and a number of analysts pointing out that six-figure sums are on the horizon, backed up by news from tanker derivatives desks in London and Singapore reporting exceptionally brisk trading this week deep into Q4.
“An action packed week in the VLCC market, with freight rates surging upwards. A tightening position list in every loading area has made all ship classes workable,” Fearnleys noted in its most recent report, adding that the strong rates were trickling down to other segments.
“All markets on Suezmaxes are still super bullish,” Fearnleys observed.
Joakim Hannisdahl from Cleaves Securities told Splash the twin events – Saudi Arabia and Cosco sanctions – had created a “perfect storm” for oil tankers.
“I now believe we could see VLCCs reaching the $100,000 a day mark in time for Christmas,” Hannisdahl said.
The Trump administration has placed sanctions on much of the Cosco tanker fleet as well as ships belonging to another Chinese outfit, Kunlun Holdings, for their shipping of Iranian crude.
VLCC earnings are leaping across the globe, not just out of the Middle East, with the US Gulf/Caribbean-China route hitting its highest level yesterday since S&P Global Platts began assessing the route six years ago.
“Right now, it’s not fundamentals that drive the market, it’s all geopolitics and massive uncertainty about what happens next,” Peter Sand, BIMCO’s chief shipping analyst told Splash, adding: “Any charterer who is desperately trying to de-risk fast, from the current high risk environment – is likely to end up paying top-dollar for it.”
In a note to clients, Michael Webber, formerly with Wells Fargo and now the founder of his own eponymous research outfit, wrote that the timing of the Cosco sanctions could not have got much better.
“We believe the current set of structural tanker dynamics are among the strongest in a decade,” Webber noted.
One-year rates for VLCCS have reached the highest levels since June 2016 at $38,000 per day due to geopolitical tensions.
“Market indications are showing that the spot market may well continue to rise, and it is likely this sentiment will also filter through to the period market somewhat whilst reducing the exposure to spot market volatility,” commented Rebecca Galanopoulos Jones, a researcher with London-based Alibra Shipping.