VLCC Rates Seen Slipping from Eight-Month High

By Keith Wallis

SINGAPORE, Dec 9 (Reuters) – Freight rates for very large crude carriers (VLCCs) may slip next week as the pre-Christmas cargo flurry, which propelled hire rates to an eight-month high on Thursday, peters out, ship brokers said.

“I would say it’s the last hurrah. I don’t see rates going much beyond current levels,” said Ashok Sharma, managing director of ship broker BRS Baxi Far East in Singapore.

“The decline could be much steeper than the rise.”

Rates gained up to 10 points on the Worldscale measure this week, pushing rates from the Middle East and West Africa to Asia to the highest since April 4.

Around 130 cargoes have been fixed for December loading from the Middle East with around 33 from West Africa, a European ship broker said. There are about five Middle East cargoes still waiting to be fixed for December loading.

Charterers including Unipec and Statoil have started to fix Middle East cargoes for January loading with seven such charters concluded this week, chartering data on Thomson Reuters Eikon showed.

The January loading programme from Basra should get fully underway next week, brokers said.

“I don’t think rates will hit W100 – there are not so many cargoes that can push it up,” the European ship broker said. “I don’t see January being a big month for charter fixtures.”

Average daily VLCC rates are around $46,000, the second best year since 2008 when the shipping downturn began.

But the second half of this year has been much more disappointing as a raft of new vessel deliveries weighed on freight rates, said Ralph Leszczynski, head of research at ship broker Banchero Costa (Bancosta).

“Between the freeze in OPEC production and continuing strong vessel deliveries next year, it’s likely that rates in 2017 will be on average somewhat lower than in 2016, but should still be well above running costs,” Leszczynski said.

Morgan Stanley has forecast average VLCC rates could fall over 44 percent to $25,000 a day next year depending on the level of crude output curbs by OPEC.

VLCC rates from the Middle East to Japan were around W79 on Thursday from W69 a week earlier.

Rate for VLCCs from West Africa to China climbed to W76.75 from W70 during the same period.

Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia surged to W130.50, the highest since March 30 on soaring cargo volumes. (Reporting by Keith Wallis; Editing by Manolo Serapio Jr.)

(c) Copyright Thomson Reuters 2016.

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