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July is a typically poor month for the VLCC segment, with
activity slowing down across all major exporting regions. There has
been limited optimism for the Middle East Gulf rates since the
beginning of the month, with most cargoes to be loaded over the
next couple of decades having already been fixed. Charterers have
not yet started to work on August fixtures, presumably as part of a
successful effort to offset the increasing insurance costs, the
Additional War Risk Premiums (AWRP) to transit the Strait of Hormuz
which were earlier expected to push the spot rates much higher for
longer.
According to the Baltic Exchange, TD3C (Middle East Gulf to
China) has dropped from marginally below WS 50 to WS 45 during the
last couple of weeks, suggesting that the impact of the tanker
attacks in the Gulf of Oman might be over. Rates were pushed back
to levels last seen in the first half of June. Several of the deals
fixed recently referred to discounted tonnage, with majors in China
and South Korea taking advantage of the current conditions by
taking ships at lower rates for voyages in late July. A good
example has been the "NEW DYNASTY", which will load cargo on 24 -
26 July from Middle East Gulf to China, for CNOOC, at WS 40.5.
Competition among shipowners has been strong, as securing any
employment is usually the target during this month. Demand doesn't
seem to be sufficient to absorb the supply concentrated in the
region, with Unipec and SK still fixing for this month. The market
doesn't expect rates to be boosted over the coming weeks, with the
sentiment starting to affect the current rates. There is no sign of
an August relief for shipowners in the horizon, with seasonality
suggesting that rates could be pushed closer to this year's lowest
levels.
Meanwhile, booking a VLCC to carry cargo from West Africa to
West India still costs around 3.2 million USD, with only a few
charterers still looking for tonnage in July. Similar situation for
cargoes heading to China, with rates standing close to WS 46.5. 10
VLCC loadings in West Africa have already been fixed for August's
first decade. Despite the relevant lack of demand, shipowners
remain resilient to accept lower rates. Ships earned a bit more two
weeks ago when voyages to China were paid around WS 48. This has
been supported so far by the rather stable activity in the US Gulf
as well, which is however expected to feel the disruption of the
Tropical Storm Barry, which has been moving towards the southern
coast of the state of Louisiana. Roughly 3.3 million barrels per
day of crude capacity could be affected during this period of heavy
rainfall throughout the US Gulf Coast.