According to the shipbroker, “the Middle East market yielded just 19 fixtures, representing a 32% w/w loss. Elsewhere, the West Africa market was more active; seven fixtures materialized there, marking a 133% w/w gain and the loftiest tally in more than a month. The August Middle East program concluded slightly ahead of our previous estimate after a number of late fixtures were reported; the month has now yielded 114 cargoes, six more than the tally as of a week ago. Together with four of this week’s West Africa fixtures having been concluded on ballast units from the Far East which would have been available for August loading in the Middle East, the number of surplus September Middle East units has trimmed significantly from 27 to 17 (albeit still the largest surplus since September 2014)”.
Charles R. Weber noted that “despite this, sentiment remained sour on the generally slow pace in the Middle East market and a wider supply/demand imbalance in the Middle East at the start of the September program than has been observed since October 2014. The emergence of the Basrah schedule added additional pessimism to near-term sentiment. Despite showing a 290,000 b/d supply increase, much of the increase is comprised of Suezmax-sized stems and only one additional VLCC-sized stem compared with August. Moreover, just one VLCC stem is noted for loading during the first decade of September, implying a delaying of absorption of the August surplus units”.
The shipbroker added that “simultaneously, uncertainty surrounds the Saudi program and though a record production rate during June was reported this week, the short August program does imply some pullback. Assuming that the short August Middle East program was merely a blip in-line with a similar temporary pullback observed during September 2014 (when oil prices commenced their surplus supply-driven tumble), there are reasons to believe that by the end of the September Middle East program supply/demand fundamentals will be more closely aligned to support a directional rebound through Q4. Contributing further to this expectation is this week’s news that Angola will boost its crude exports during October to a four-year high with Asia the likely destination of the increase”.
CR Weber also mentioned that “as West Africa cargoes are worked in advance of those in the Middle East, any corresponding increase in VLCC demand in the region – and a corresponding draw on Middle East positions – to service October cargoes should occur around the time that Middle East charterers move into the second-decade of the September program there. The coinciding of stronger demand in both markets at that time will likely lead to a reversal of sentiment and support fresh rate gains. In the interim, however, rates appear likely to remain modestly soft. Middle East Rates to the Far East fell 9.3 points w/w to an average of ws33.3 while the closing assessment stands at ws30. Corresponding TCEs were off by 30% to an average of ~$27,863/day while the present assessment yields ~$23,736/day – a fresh YTD low. Rates to the USG via the Cape were assessed at an average of ws23.1, off by 1.8 points from last week’s assessed average. Triangulated Westbound trade earnings fell 4% w/w to an average of ~$58,478/day. Atlantic Basin Rates on the WAFR-FEAST routes shed 6.9 points w/w to conclude at an average of ws45.1. Corresponding TCEs were off by 17% to an average of ~$41,468/day. IN the Caribbean market, rates were softer on the back of generally sour sentiment in the wider VLCC market. Regional supply/demand fundamentals remain unchanged; however, units freeing in the Red Sea are now looking at ex?Caribbean business, which boosts the effective supply. The CBS-SPORE route fell by $100k to a closing assessment of $5.9m and remains under modest negative pressure”, CR Weber concluded.
Meanwhile, in the Suezmax market, “chartering demand in the West Africa Suezmax market trimmed modestly with 21 fresh fixtures representing a 4.5% w/w reduction. A low Brent premium to Dubai benchmarks has helped to support Asian demand, though corresponding support for VLCC demand in the region from Asian buyers during the September program has been largely kept in check due to high crude and product inventories and more extensive seasonal maintenance. As a result, the spread between West Africa cargoes between VLCCs and Suezmaxes during the September program has thus far been largely unchanged from August (thus far). While this has implied stronger Suezmax demand and weaker VLCC demand (as compared with the first seven months of 2015), Suezmax rates have remained weak. The WAFR-USAC and WAFR? UKC routes shed 5 points and 2.5 points, respectively, to ws65 and ws67.5. A seasonal pullback in Aframax demand has reduced rates for both Aframaxes and Suezmaxes in turn (given the larger class’ ability to compete when Aframax markets are tight). Late purchases of September West Africa cargoes could offer support to Suezmaxes depending on the extent thereof; otherwise rates appear likely to be around a near-term floor”, CR Weber concluded.
Finally, “the Caribbean Aframax market remained soft this week on the back of continued subdued activity with the weekly fixture tally easing 17% w/w to a total of 10. Rates remained soft throughout the week with the CBS-USG route ultimately losing 2.5 points to conclude at an assessed ws80. A late week fixture at ws90 was reported, though this fixture required high heating and had max-DWT restrictions; as such this fixture is not entirely reflective of market fundamentals. Owners will likely try to capitalize on the high last-done rate at the start of the upcoming week though these attempts will be complicated by the ongoing availability of prompt tonnage. As such, failing an early-week demand surge, rates appear set to remain soft”, CR Weber concluded.