Rates for VLCCs out of the Middle East to Asia have reached the Worldscale 100 mark, pushing earnings close to $50,000 a day, levels not seen for a number of years.
“Strong volumes over time combined with a typhoon or two has worked wonders for the sentiment in the VLCC market,” brokers Fearnleys reported in its latest weekly report, adding: “Owners firmly in the driving seat as volumes for virtually all the major VLCC routes continue active whilst tonnage availability in the near term appears thinner than for a long time.”
Comparitively long-haul crude transportation, especially from West Africa, is growing as oil-consuming countries are switching from Iranian producers to others. In addition, a major Chinese charterer, Unipec, has moved in recent days to take a large number of ships, further tightening supply.
Commenting on the VLCC bounce, Peter Sand, chief shipping analyst at shipowning body BIMCO, admitted the jump had caught many by surprise, but he questioned whether it could last given the large volumes of newbuilds set to deliver soon.
“It’s no secret that October has taken us by a very positive surprise,” Sand told Splash today. “The demand picture is extremely blurry for the time being, and that may finally have played into the hands of the operators. This year charterers have held onto all the trump cards.”
Sand warned however that he felt the current boom may well be a “dead cat bounce” with 2019 set for a flurry of new big ships to enter into active service.
Court Smith, an analyst at online pricing vehicle VesselsValue, agreed with Sand to an extent, but felt VLCCs could make it another solid comeback in the second half of 2019 as many newbuilds will not actually come off the slipways as anticipated next year.
“It looks like this winter will be a pleasant one for shipowners,” Smith told Splash. “The supply of VLCCs on the water has held steady for the past several months, reducing the concerns of oversupply. Market partipants should be concerned about the spring months that normally see a greater number of newbuilds delivered, and the 2019 orderbook is large. However, oil is slipping back into contango, hinting at the prospect of some floating storage. Also, we expect a large number of removals in 2019.”