Tradewinds: Crude Rates Flounder as Glut Grows

“Crude-tanker owners have been left desperately seeking signs of a recovery in the face of supply and demand fundamentals that point to little more than a continuation of depressed rates over the next two years. With VLCC rates to the Far East hitting a recent low of just over $1,000 per day, the market appears to have hit rock bottom, although pundits fear the upturn could be painfully slow. . . . Hopes for increased tonne miles are pinned chiefly on China raising its demand for crude from South America and East Africa. An agreement between PDVSA and PetroChina to build a $8.7bn refinery at Jieyang that includes a deal to import some 20 million tonnes of Venezuelan crude per year has got owners excited. The deal could soak up some 20 VLCCs-worth of supply capacity and it adds to growing cargo volumes on the Atlantic Basin-to-Far East trades. Brokers point out that such is the growth in the long-haul Atlantic Basin trade that some owners are prepared to take loss-making voyages to the US to reposition vessels for better rates from the Atlantic to the Far East. This developing trade pattern is helping make tanker operations more efficient and profitable in the region. US broker Poten & Partners points out that fixtures to the Far East from the Atlantic Basin are now more than double that of the Arabian Gulf to the US. The broker said: ‘There is ample opportunity for owners to take advantage of the more attractive economics of a triangulation voyage in which a ship picks up a second backhaul cargo instead of returning to its original load port in ballast. In this fashion, shipowners can often be paid for two voyages concurrently, effectively increasing their utilisation beyond 100% from an earnings prospective.’”