VLCC rates to stay firm on high cargo volumes

Freight rates for very large crude carriers (VLCCs) could dip but are likely to remain firm next week on buoyant cargo volumes, ship brokers said on Friday.

That came after VLCC rates from the Middle East to Japan hit a fresh four-month high on Wednesday, rising to almost 67.75 on the Worldscale measure, equivalent to $47,479 per day, the highest since June 8.

“Rates will come off a bit, but it’s difficult to say how much. I don’t think we’ll see the market drop dramatically,” a European supertanker broker said on Friday.

The broker estimated there were around 135 Middle East VLCC cargoes fixed for loading in October although other market watchers recorded around 140 fixtures.

Supertanker rates were also buoyed by a 50 percent increase in the number of fixtures from West Africa after exporters ramped up production.

“We’re in winter so we expect high volumes of cargo anyway but it’s not likely to be so extreme as last month,” the broker added.

Owners increased vessel speeds on the empty return voyage to take advantage of higher freight rates which added to the number of VLCCs available for charter, the broker said.

Around 30 Middle East cargoes have been fixed for November loading, said Captain Ashok Sharma, Managing Director of ship broker BRS-Baxi Far East in Singapore.

Up to 10 cargoes remained to be fixed for loading in the first 10 days of November with 45-50 cargos forecast up to Nov. 20 compared with about 60 VLCCs available for charter, he said.

There have been fewer cargoes out of Basra for loading in the first 10 days – the market is anticipating that shortfall will be made up later in November, Sharma said.

“Winter demand, fuel oil flows into East Asia and possibly (the) Chinese continuing to stockpile crude in their strategic petroleum reserve, would be factors owners hope will work in their favour to keep market sentiment and demand buoyant,” he added.

But possible curbs on crude exports from Nigeria and Angola in the next three months could have a dampening effect on supertanker rates, Sharma said.

That came after Nigerian exports of Bonny Light crude oil could fall to 156,000 barrels per day (bpd) in December, down from 175,000 bpd initially planned in November, according to early loading programmes distributed to traders.

VLCC rates from the Middle East to Japan climbed to W67 on Thursday from around W65.75 last week.

Rates for VLCCs from West Africa to China remained flat at around W67.50 on Thursday, from W67.25 the same day last week, the highest since May.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia surged to almost W98 on Thursday from W73.75 last Thursday, the highest since April 28, on strong cargo volumes.

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