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How will the cutback affect VLCC?

How will the cutback affect VLCC?
Fears that tonnage availability will swell due to Opec?s agreed production cut from January 1 has cast a shadow over the outlook for very large crude carrier rates in 2009.

Fears that tonnage availability will swell due to Opec"s agreed production cut from January 1 has cast a shadow over the outlook for very large crude carrier rates in 2009.

Fears that tonnage availability will swell due to Opec"s agreed production cut from January 1 has cast a shadow over the outlook for very large crude carrier rates in 2009.

The Organization of the Petroleum Countries agreed last week to cut production by 2.2m barrels per day.

The cut, which is theoretically equivalent to just over one VLCC loading per day, has led the market to question what effect it will have on shipping demand.

?With less oil to be shipped, we could expect to see a resultant swelling of tonnage availability,? warned Galbraith"s in its end-of-week report.

Despite experiencing one of the strongest 12-month earnings periods ever, the outlook for crude oil demand remained clouded by a weaker near-term economic forecast, warned New York shipbroker Poten & Partners.

Last week Dahlman Rose downgraded its VLCC earnings forecast for the first half of 2009 from $45,000 per day to $35,000.

Commenting on Opec"s production cut from January 1, Dahlman Rose said: ?Significantly lower output should reduce longhaul VLCC demand and lead to much lower spot rates during the first six months of 2009.?

In the run-up to Christmas, many were predicting a flurry of fixtures as charterers looked to finish up their activities for 2008. However, only 20 fixtures were reported in the Middle East Gulf last week, which was down on the previous week.

?The market appears to have stagnated with this slowdown, as rates for the Middle East Gulf/east (double-hulls) continued over from last week, steady at the W80-W85 level,? Galbraith"s said.

Fellow London broker Gibson in its end-of-week report said: ?[Owners] were disappointed as charterers largely refused to take pre-emptive action on the January programme until they had secured final confirmations from suppliers.?

Yesterday, the Baltic Exchange"s benchmark TD3 route, which covers a VLCC voyage from the Middle East to Japan, was W71.25, down W7.34 from the close of business last week. This was equivalent to earnings of $47,555 per day.

After four fixtures were concluded on Friday, the January total was up to 19, Imarex Asia said in its daily report.

A small build-up in tonnage saw the number of VLCCs available to load over the next four weeks rise by three to 56.

?There are only two vessels available for prompt loading, but then again, there"s not likely to be any prompt cargoes,? the Singapore-based derivatives broker said.

Imarex said the pace of January"s loading programme had started in much the same way as December"s: slow. ?If this trend/pace continues, expect rates for the next few days to stay flat,? it added.

In the Atlantic, a tight supply in tonnage had helped to push rates to around W110 for a West Africa to US Gulf voyage.

However, rates have eased back to W94.81 to maintain an economic rates differential to the suezmax tanker, whose rates fell amid a reasonable supply of tonnage.

www.TurkishMaritime.com.tr

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