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Crude oil carried on Aframaxes has been declining in August,
according to data by IHS Markit Commodities at Sea.
The reduction has forced several owners to reposition their
ballasters, which in-turn changes the balances observed in the
market. The impact has been clear in the freight market, with spot
rates feeling the pressure of oversupply developed in exporting
regions across Europe, while less open units left in the Middle
Eastern Gulf.
The beginning of August was a struggle for the Aframax segment,
with rates having failed to recover, as earlier anticipated. The
situation has been similar across all major routes, with a decline
of at least a few points observed everywhere.
TD14 and TD17 reached record low levels this year, close to WS
90 and WS 55 respectively, while TD19 fell below WS 75. The drop
has been dramatic, as rates stood above WS 100 a month ago. In
terms of TCE, earnings fell from over USD 15,000 per day to just
USD 3,000 per day. Both the North and Baltic Sea markets seem to be
under severe pressure. Sentiment remains unchanged in the
Mediterranean, with a plethora of options for charterers to choose
from.
The downward trend might impact the Middle East, but rates in
TD8 still exceed USD 10,000 per day. The on-going tensions in the
Middle Eastern Gulf have supported earnings, with several owners
repositioning ballasters away from the region to avoid the
risk.
Earlier this month, demand was also affected by Libya's National
Oil Company declaring a force majeure on El Sharara oilfield which
is set to push August's exports lower than previously expected.
Meanwhile, West Africa's early September loading programme doesn't
look very promising, but hope comes from the US, as exports
continue to rise. Volumes carried on Aframaxes to international
destinations have increased by almost a third since a year ago,
with South Korea having been the major contributor absorbing
additional barrels. However, earnings haven't been strong since
last month.
Overall, Aframax earnings have been improving year-on-year,
standing more than 40% higher than a year ago (for the period
between January and July). Fundamentals will improve, however, as
deliveries have slowed down, with no new ships added to the fleet
since late June. Demolitions have been rather limited this year as
well, but as scheduled deliveries for H2 2019 stand at low levels,
supply is at least expected to remain at current levels, allowing
some space for optimism to develop for the last quarter of this
year.
Posted 20 August 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
