Dahlman Rose & Company, LLC has retracted its previous projection of a rebound in spot tanker rates for the fourth quarter of this year (Q4).
Dahlman Rose & Company, LLC has retracted its previous projection of a rebound in spot tanker rates for the fourth quarter of this year (Q4), forecasting a longer-than-expected downturn, reports said.
The New York-headquartered investment bank is expecting spot tanker rates to face continued downward pressure throughout this year on the back of swelling global oil stockpiles.
?OPEC has been cutting production levels since August 2008 and inventories have continued to build due to more severe demand contraction than had been previously anticipated,? said Dahlman Rose analyst Omar Nokta.
Sharing sentiment of a more severe demand contraction than previously anticipated is the Paris-based International Energy Agency (IEA) which has revised its 2009 global oil demand further downwards by 1 million barrels per day (bpd).
Meanwhile, Nokta has cut his 2009 projection on VLCC spot rates by 20% to $32,000 per day per vessel from a previously forecast $40,000 per day per vessel.
?We also expect spot rate pressure to impact tanker values further, with current five year old VLCC assessments of $89 million potentially falling to $75 million by year-end,? he added.
At present activity in VLCC spot markets around the world remain thin, keeping rates suppressed at very low levels.
Some MEG-East routes had already broken the WS 30 floor while the West African market softened further to WS 42 from WS 45.
The benchmark MEG-UKC route for MEG-West voyages was still flat around WS 23 with average earnings last week of some $11,000 per day per vessel.
The benchmark MEG-Korea route was pegged around WS 27 with average earnings last week of some $14,000 per day per vessel.
According to Bassøe MEG-East voyages are currently fetching rates ?we have not seen for almost 10 years?.
?With increased bunker prices the daily results are down to a bare $10,000 pd [per day per vessel] level,? it said.
Looking ahead ?there are bleak prospects for VLCCs in the MEG with no immediate recovery on the horizon,? Bassøe said.
Vessel over-supply was building up on the 'twin effects' of OPEC export reductions and declining demand, with no real positive factor in sight to 'mop up' the excess tonnage.