VLCC rates, averaging above $40,000 a day this month, dramatically up from September’s $16,500 average, look set for a strong finish to 2018.
New York tanker brokers Poten & Partner show that at least 157 VLCCs have been fixed out of the Arabian Gulf so far this month, the highest monthly volume since at least 2016. This compares to an average of 135 per month in 2018 year-to-date and 124 in 2017.
Volumes from West Africa have picked up as well. The number of 1m barrel stems reached 75 in October, equivalent to about 37 VLCC cargoes, the highest monthly number since at least 2013 and well above the year-to-date monthly average of 32 cargoes.
There has also been a steady flow of activity from the US Gulf/Caribbean area, primarily long-haul American crude oil exports.
Poten stated that the looming Iranian sanctions are likely playing a role as well.
“Iranian exports have dwindled, but production has not come down to the same extent, suggesting an increasing level of floating storage (primarily utilizing the tanker fleet of the National Iranian Tanker Company). This has taken a portion of the Iranian tanker fleet off the market,” Poten noted, adding that at the same time, many of their traditional customers have completely stopped or significantly reduced their purchases of Iranian crude oil. They are sourcing their crude oil and condensates from different suppliers, leading to some dislocation as well as more ton-mile demand such as South Korea and India buying condensates from the US rather than Iran.
Increased tanker scrapping may have contributed to the tighter tonnage balances as well, the New York brokerage posited.
“While some of the contributing factors are clearly seasonal and therefore temporary, other drivers (like Iranian sanctions) will be here to stay and could boost ton-mile demand well into 2019,” Poten concluded.