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OPEC UPS THE ANTE! - The MediTelegraph

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OPEC UPS THE ANTE! - The MediTelegraph
12th June 2015
OPEC UPS THE ANTE!
OPEC's announcement that it would maintain crude production came as little surprise to the global
oil markets. A specific statement that its production target of 30 million b/d would remain
unchanged failed to garner much of a market reaction and was largely perceived as little more
than a token gesture to Iran, one of the most vocal opponents of the de facto strategy of
defending market share at the expense of prices. The group has not adhered to is production target
for the past 12 months and few expect that to change any time soon. It therefore seems apparent
that OPEC Middle East crude production - a key driver of crude tanker demand, will remain robust
for the balance of 2015 at least.
Despite Iran's stance on OPEC's
emergent strategy, its ministers
have been clear that Iran
intends to restore exports to pre
sanction levels if restrictions are
successfully
lifted.
Iranian
ministers
have
confidently
expressed
that
production
could increase by 500,000 b/d
soon
after
sanctions
are
unwound and by another
500,000 b/d within 6 months.
Whilst some market participants
believe Iran is overstating its
capabilities, the approx. 38
million barrels of Iranian oil in
floating storage, in addition to
shore based stocks could
quickly add supply to the market. Nevertheless talks between the West and Iran are due to
conclude this month, increasing the prospect of more Iranian barrels, even if the absolute volumes
are questionable. Even if these barrels do materialise, there is little indication that other OPEC
members would be prepared to sacrifice their own share in order to accommodate Iran’s
ambitions.
Iraq too has aspirations to increase exports despite continued turmoil in the country. Having recently
split Basrah Light into two grades in order to stabilise quality, Iraq now has more flexibility to boost
production and exports of Basrah Heavy. However logistical problems remain. Loading delays
continue to persist and Basrah now requires tankers loading heavy crude to carry cranes with a
minimum safe working load (SWL) of 20 tonnes, ruling out around three quarters of the trading
Suezmax fleet from loading the heavier grade, allowing suitable vessels to command premiums.
Ultimately there is more Middle East OPEC crude in the pipeline, although barriers, whether political,
logistical or seasonal remain. Taking Iran out of the equation, higher OPEC production over the
coming months may not translate into higher tanker demand as domestic air conditioning use
peaks throughout the summer months whilst the Yanbu and Ruwais refineries also continue to
consume regional supplies. However, global oil demand is rising faster than initially anticipated with
the IEA’s latest report projecting 2015 demand growth of 1.4 million b/d, double the growth
witnessed in 2014, providing a further incentive for OPEC members to continue to produce and
subsequently supporting tanker earnings for the balance of 2015.
CRUDE
Middle East_________________________
VLCC Charterers wasted no time in driving through
the remainder of the relatively swollen June
programme - a volume that would, ordinarily, have
allowed for a market push but with availability
always 'easy' enough to prevent any pinch-points,
Owners failed to budge rates from their previous low
ws 60 East, mid ws 30s West, mark, and they’ll be
hoping for a bright start to the July campaign to
give them another opportunity. With Ramadan
commencing late next week, however, that is far
from a certainty. Suezmaxes failed to maintain the
highs of last week upon a less frenetic pace ,and
adequate availability. Rates tracked lower to mid ws
80s East and the mid ws 40s to the West accordingly,
and will continue rather flatline for the near term, at
least. Aframaxes kept their 80,000 by ws 140 plate
spinning to Singapore, but levels of enquiry fell short
of providing enough juice to fire rates to new highs,
and that should remain the case into next week too.
Thereafter, Charterers took their foot off the gas,
and inevitably rates began to crumble into the ws
130s, with lower values on the cards. Suezmaxes did
what they had to and managed to just about hold
on to 140,000 by ws 95/97.5 from the Black Sea to
European destinations over the slow-ish patch. With
West Africa a little more robust, and with July
programmes expected early next week, there is
some degree of hope/expectation that their playing
field will be more favourable then.
Caribbean_________________________
Aframaxes re-started unchanged, began to wobble
mid-week, but then ended more strongly with rates
at a solid 70 x ws 140 base upcoast, and further
gains possible if the activity continues. VLCCs didn’t
yield great volumes, but early tonnage remains
tight, and rate levels maintain at around $7.3 million
to Singapore, and $6.3 million to West Coast India
for now, though more forward dates may start to
come a touch under pressure...a touch.
West Africa_________________________
North Sea___________________________
Suezmaxes came under early pressure as tonnage
lists built, and Charterers adopted a relaxed
attitude. Eventually, once rates had just breached
the ws 80 mark, Owners put up stouter resistance,
and that then provoked enough interest to allow
rates to inflate slightly to ws 82.5 USGulf and ws 85 to
Europe, but more momentum is needed for that
trend to be maintained. VLCCs continued in
'conference' mode as Eastern ballasters merely
asked for similar values to the unchanged AGulf
zone. Rates to the East stayed in the very low ws 60s
with $4.5 million paid for a specimen run to West
Coast India.
As in the Med - Aframaxes commenced
proceedings in lively form, with appropriately spiky
rates, but then Charterers held back and the
inevitable correction got underway. 80,000 cross
UKCont now eases to ws 130 with 100,000 by ws 110
available X-Baltic, and further deterioration is
anticipated for next week. Suezmaxes enjoyed a
rare burst of fuel oil activity transatlantic, but the
going 135,000 by ws 67.5 for those runs was hardly
anything to shout about. VLCCs in the area got the
odd knock for crude oil bbls from Hound Point to
South Korea at rates of up to $7.65 million, but the
fuel oil 'Arb' remained tightly shut to Singapore - bids
at $4.5 million against offers of no less than $6.00
million...no dice.
Mediterranean_____________________
Aframaxes had already threatened higher, and a
lively start to the week quickly converted into cross
Med rates ramping up to above ws 140.
CLEAN PRODUCTS
East______________________________
MRs this week have been buoyant with rates rising
across all routes. TC12 has firmed with ws 140 on
subjects off natural fixing dates and ws 145 off prompt
dates, this is a 15-20 point rise over the week. EAfr has
been slightly slower, only seeing a 2.5 point rise to ws
182.5, however finishes the week poised to firm further.
AG to UKCont has fixed and a vessel is on subjects
$1.675 million at the time of writing. The main gains have
been seen on the shorthauls, cross AG rising to $380,000
basis Kuwait/UAE and $360,000 basis Jubail to UAE. Red
Sea runs are firm with $795.000 on subjects basis Gizan.
The tonnage remains very tight and rates look set to
remain firm for the near future. A quieter week on LR1s
this week yet LR2s have continued to strike ahead. After
some 10 days of limited enquiry LR1s have seen rates
drop back with 55,000 mt Naphtha AG/Japan down to
ws 140 and 65,000 mt Jet AG/UKCont down to $2.375
million. We could easily see more come off these levels
with a mounting tonnage list going forward. By contract
LR2s have seen more business with 75,000 mt Naphtha
AG/Japan up to ws 126.5 today and 90,000 mt Jet
AG/UKCont confirmed at $2.95 million. This trend is likely
to continue into next week. The MRs in North Asia have
generally remained stable this week. Owners started
the week with high hopes, but unfortunately cargo
volume has not really got going, and notably we have
not seen the usual amount of volume heading down to
Australia from the North. There is a school of thought
that things are now getting busier off end month to
early July, but for now Korea/Singapore should fix at
$490-500,000. In Singapore, MR tonnage is tight in the
early position, and there has been a multitude of late
running ships due to berthing delays. We have seen
some decent numbers paid for prompt requirements
and Singapore/Australia should now fetch around 30 kt
x ws 185-190, however there are some ballasting ships
approaching for end June, so cargo volume needs to
stay consistent to prevent rate slippage next week. LR1s
have been quiet in the Far East, and Korea/Singapore
should fix at $525-550,000. LR2s have had a busier week,
and their strength in the Middle East has helped along
the backhaul runs too - Korea/Singapore should fix at
$650-675,000 levels, date dependant.
Mediterranean____________________
Another strong week in the Mediterranean, with
positions tight for Handys and MRs alike. There has been
steady demand for the Handys and due to uncertain
itineraries, fixed in the 30 x ws 185-190 bracket with the
Black Sea paying closer to 30 x ws 190-192.5 levels due
to steady demand. MRs for Med loading thinned out by
mid-week due to a number of ships fixing from the
UKCont, and Med loading cargoes considered in line
with TC2 37kt x ws 160-165 and 37 x ws 180 to West
Africa. Heading East a few ships were confirmed
around $1.1-1.15 million level to Red Sea + 100k AG
UK Continent_____________________
A steady week for TC2 as a stream of cargoes against a
balanced tonnage lists kept the market supported at
ws 160-165 levels basis 37,000 mts of Mogas. Not many
questions to West Africa for MRs, Owners ideas remain
at an additional 15-20 points above transatlantic runs.
The LR1s enjoyed some activity with several enquiries
tightening up the list, and runs staying West ended up
at ws 132.5 basis 60kt. LR2s have also had several
enquires both East and West of Suez which gave
Owners further choices leaving rates up at $2.9 million
loading X-Continent with Naptha heading out to the
Far East. The shorthaul market in North West Europe has
remained buoyant with levels sliding sideways at ws
187.5 basis 30kt. The Flexis doing shuttle runs on the cross
Continent market continue to achieve ws 195 basis
22kt.
DIRTY PRODUCTS
Handy____________________________
In both the Continent and the Med Owners can
reflect upon a week of achievement where both
regions have seen increment levied on the back of
what has been an extremely busy period. In the
North the tonnage situation was known to those
following it, and being sparse in availability the
activity which subsequently followed left Owners
well and truly in the driving seat. Subsequently a
new milestone of ws 150 was accomplished! In the
Med a similar tune rang out where a few days of
collective activity decimated the tonnage list from
virtually all firm availability. Typically where both the
Med and Black Sea were active in tandem, Owners
are usually able to benefit; and this market is no
exception.
MR______________________________
Surrounding markets have rubbed off onto MR's this
week with Charterers making the most of the bigger
intakes by moving full size stems. Owners were able
to make the most of such conditions where tests of
the market strength proved favourable. Sentiment
remains firm in this sector, particularly in the
continent where we are now having to looking
towards end month dates as a fixing window.
Elsewhere with the Mediterranean, with the Handies
spiking, Owners on the larger sizes didn't find it hard
to cover their tonnage as inquiry spilled over onto
this sector. Although we didn't see a great deal
movement compared to the Continent, the
numbers were heading in a positive direction.
Panamax_________________________
As we reach the end of what has been a positive
week for Owners, all eyes are open in search of the
next wave of available tonnage. A good amount of
activity has transformed the tonnage lists this week,
and at the time of writing, Charterers sit eagerly
awaiting news of itineraries firming for possible
targets to be chartered next. Looking ahead there
remains a feeling of strength in this sector and we
can therefore anticipate sentiment to roll over into
the next fixing window.
Dirty Tanker Spot Market Developments - Spot Worldscale
wk on wk
Jun
Last
Last
FFA
change
Week
60
Month
70
Q3
54
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
+0
11th
61
-12
80
92
120
78
TD7 Aframax N.Sea-UKC
+13
145
133
102
111
Dirty Tanker Spot Market Developments - $/day tce (a)
wk on wk
Jun
Last
Last
FFA
change
Week
63,000
Month
74,000
Q3
51,000
AG-Japan
TD3 VLCC
TD20 Suezmax WAF-UKC
+250
11th
63,250
-9,250
39,500
48,750
67,750
43,250
TD7 Aframax N.Sea-UKC
+9,250
65,000
55,750
26,750
37,250
Clean Tanker Spot Market Developments - Spot Worldscale
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Jun
Last
Last
FFA
change
Week
126
Month
104
Q3
-1
11th
125
+5
159
154
155
154
-4
141
144
121
128
+4
189
185
179
Clean Tanker Spot Market Developments - $/day tce (a)
AG-Japan
TC1 LR2
TC2 MR - w est UKC-USAC
AG-Japan
TC5 LR1
TC7 MR - east Singapore-EC Aus
wk on wk
Jun
Last
Last
FFA
change
Week
38,250
Month
26,750
Q3
-2,500
11th
35,750
+1,000
23,500
22,500
21,500
22,000
-1,250
30,750
32,000
22,750
26,000
+500
22,250
21,750
0
20,000
(a) based on round voyage economics at 'market' speed
LQM Bunker Price (Rotterdam HSFO 380)
+8
340
332
355
LQM Bunker Price (Fujairah 380 HSFO)
+6
360
354
390
LQM Bunker Price (Singapore 380 HSFO)
+3
365
362
379
LQM Bunker Price (Rotterdam 0.1% LSFO)
+20
583
563
595
RNM/JH/JD/DP/LHT
Produced by Gibson Consultancy and Research
Visit Gibson’s website at www.gibson.co.uk for latest market information
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the market information is believed to be reasonably accurate, it is by its nature subject to limited audits and
validations. No responsibility can be accepted for any errors or any consequences arising therefrom. No
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