VLCC rates leap as oil prices climb towards $100

VLCC rates are finally showing signs of life with many analysts now saying the market has bottomed out and is poised for growth.

Platts is reporting that freight rates for VLCCs making long-haul voyages east out of the US Gulf Coast and Caribbean leapt yesterday, climbing by $1m in just two trading sessions as tonnage availability becomes scarce and Asian buyers seek cheaper US crude cargoes.

Mighty Unipec from China, the world’s top tanker charterer, has reentered the US crude buying market after a three-month hiatus helping boost rates.

Rates for VLCCs carrying a dirty cargo on a USGC-Singapore run have climbed nearly 23% since Thursday, the day before rates jumped $800,000 day on day. Freight rates rose another $200,000 Monday to reach $5.4m.

In a recently published report investment bank Jefferies has turned bullish on the crude market as a whole, led by VLCCs, claiming the sector has finally bottomed out. A rebound could last years, Jefferies predicted, thanks to huge scrapping levels and the impending sulphur cap.

VLCCs are not just strengthening out of the US. Shipbroker Charles R. Weber said in its most recent weekly report that “VLCC rates were strengthening this week and are poised for more substantial gains in the coming week on the back of strong draws on Middle East tonnage by West Africa demand, which extended a decline in surplus tonnage. Demand in the Middle East market rose 32% w/w to a six‐week high of 41 fixtures while demand in the West Africa market surged 140% w/w to a YTD high of 12 fixtures. With charterers working in the second decade of the October Middle East program, the strong demand profile in both markets – which source tonnage from the same pool of available units – saw the extent of surplus capacity in the date range drop to a fresh 19‐month low. Just 10 surplus units are projected to be available at the conclusion of the second decade. This is three fewer than the level seen at the conclusion of the month’s first decade and is more than half the 22 surplus units at the conclusion of the September program”.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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