Refinery revamps to slow crude tanker paper deals.
Middle East to Asia trades expected to dip in second quarter.
Trading activity in crude tanker derivatives is forecast to fall in the second quarter as refiners and oil traders are expected to cut back on Middle East crude shipments to Asia.
Derivative brokers expect fewer forward freight agreements involving very large crude carriers on the Baltic Exchange"s TD3 route to be purchased by companies hedging against changes in spot rates from next month. Lower FFA sales activity is forecast to continue into May and June.
?There will be a lot of refinery maintenance going on, so a few more hedgers will stay away from the paper market. They will not want to ship more cargoes to their refineries, so some of the players will stop participating in the paper market,? an Imarex Asia tanker derivatives broker said.
?I guess five, six or seven players will scale down trading. It is the usual companies ? the refineries and trading houses.?
A tanker derivatives broker with Simpson, Spence & Young predicted a slowdown in FFA trading activity in the second quarter.
He said trading had been strong so far this month, adding: ?It was a busy week last week and this week started busy, so there is stuff going on.?
The value of TD3 contracts ? VLCCs shipping 260,000 tonnes of Saudi Arabian crude to Japan ? has risen since the start of last week in reaction to an improvement in spot rates and steady trading activity. The March TD3 contract rose from W82 to W84 yesterday, which equates to a time charter equivalent of $39,000 per day, according to Imarex Asia.
The SSY broker said the April contract value went up from W74 to W77 over the week, adding: ?The rise was a couple of points but nothing too drastic.?
The Baltic Exchange TD3 spot rate climbed from W77 last week to W80.5, or $39,700 per day yesterday.
?Rates are coming up again. Tonnage is not that short ? it is quite balanced,? the Imarex Asia broker said.
?But sometimes in the VLCC market, the balanced tonnage gives VLCC owners an advantage.
?We have also seen this in the paper market.?
Product tanker derivatives were heading downwards this week in reaction to softening spot rates for medium range and long range tankers.
There was a brief uptick in product tanker spot rates on the Baltic Exchange"s TC2 and TC4 routes at the end of last month as charterers and shipowners expected additional tankers to be fixed to ship cargoes to earthquake-hit Chile. But rates on these routes had fallen this month.
?The Chile earthquake drove the sentiment up and had an affect on the TC2 and TC4 paper [values]. But it turns out there is not going to be a huge impact on the freight rates, so it has been cranking down again,? said the Imarex Asia broker.
The SSY broker said the March contract value for TC2 ? set against MR tankers shipping Rotterdam gasoline to New York ? was W168, down from W171 on Monday.
?TC2 has come off about 10 points from last week. TC4 is a couple of points down, but the TC5 is fairly unchanged,? the broker added.
The Imarex Asia broker said the April contract value for the TC4 route ? MRs shipping Singapore products to Japan ? was ?under pressure? and fell W4 points to W140 from last week.