Freight rates for very large crude carriers (VLCCs), which hit an 11-month low this week, could slide further next week amid a seasonal slowdown exacerbated by strong vessel supply, shipping executives said.
"I'm not sure we've seen the worst yet," an European supertanker broker said on Friday.
"Refineries are slowing down. Oil markets are clogged up by large inventories of products and crude," the broker said.
Excess oil supply has been exacerbated by surplus tonnage from new supertanker deliveries, vessels returning to service from repair and ships rejoining the active trading fleet after being used as floating storage.
Vitol and Koch are among the charterers that stopped using at least three supertankers as floating storage because the charters ended or the ships are trading in the open charter market, the European broker said.
Charter rates are unlikely to improve in the short-term, shipping executives said.
"There seems to be no hope for recovery for the next few weeks. Chinese cargoes are going mostly on domestic vessels and we really need more cargoes for things to improve," said a Singapore-based supertanker broker on Friday.
The headwinds could continue until the fourth quarter when there will be an anticipated seasonal rate recovery supported by more upbeat demand forecasts, Paddy Rodgers, chief executive of leading tanker owner Euronav, said in an earnings statement on Thursday.
That came as VLCC rates from the Middle East to Japan fell to around 36 on the Worldscale measure on Thursday from around W43.75 last week. That is the lowest since September 1, 2015 and equivalent to charter earnings of $19,458 per day.
Charterers though are willing to pay higher rates on some trades, although some of the charters have yet to be confirmed.
ST Shipping, the shipping and trading arm of Glencore, offered W44, equivalent to about $27,000 a day, to charter the 280,889 deadweight tonne (dwt) Ataka to transport 270,000 tonnes of crude from Ash Shihr in the Yemen to Ulsan, South Korea, chartering data on the Reuters Eikon terminal showed.
But the charter, together with a deal by ST Shipping for the 149,878 dwt Suezmax tanker Seaprince to transport about 130,000 tonnes of crude from Ash Shihr to China, had still to be agreed, brokers said.
Charter rates for VLCCs from West Africa to China were down to around W43 on Thursday, the lowest since September 1, 2015, from W48.75 the same day last week, due to low chartering volumes in several Nigerian ports, Norwegian ship broker Fearnley said in a note on Wednesday.
Rates for an 80,000 deadweight tonne Aframax tanker from Southeast Asia to East Coast Australia slipped to W83.25 on Thursday from about W86.25 last week on increased tonnage availability, brokers said.
Source: Hellenic Shipping news