Oil Market
There were two pieces of news last week that will bring opposing forces to bear on the oil market. The first is that the Russian government has ratified the Kyoto Accord on the reduction of greenhouse gases. Their endorsement has the effect of making the accord universal. The second is that voters in the United States have returned the incumbent president for a second term in the White House. This will have the effect of maintaining the country's increasing dependence on non-renewable fossil fuels.
Myron Ebell, director of the Competitive Enterprise Institute in Washington, largely supported by the American oil industry, has accused European scientists of alarmist pronouncements based on unrealistic climatic assumptions. It appears the battle lines are being drawn between those who are suggesting caution in our handling of the world's environment and those who wish to be more reckless with it.
VLCC
Two VLCC fixtures reported at the end of the week show how the market has settled in the Arabian Gulf. Shell was reported to have fixed the Starlight Jewel Gulf to Europe at Worldscale 185 and the Front Serenade at fixed Gulf/Singapore at WS285.
There has always been a slight premium paid for eastern voyages as opposed to western voyages on the basis of voyage length. This differential has been increasing over the last month, but it has to be said that a 100 point differential is most unusual. The supposition is that voyages to the East must now be looked at as strictly round voyages with half the steaming time carrying cargo and the other half, ballasting back.
With an increasing amount of western crude oil being purchased by buyers in the Far East, the patterns of trade have changed. A VLCC loading in the Arabian Gulf to NW Europe steams for about 33 days with cargo. Having discharged in Europe, she sails in ballast to load in West Africa, which takes about 12 days. Then, after loading in a country such as Nigeria, it would be about 30 days with cargo aboard to sail to the Far East followed by 18 days in ballast back to the Gulf. With loading and unloading time taken into account, the voyage time would be about 100 days, of which two thirds would be carrying cargo and one third in ballast. Put into that context, the 100 point differential looks reasonable.
One really has to feel sorry for the sailors though.
In the market there is a bit of a lull between the completion of the November loadings and the commencement of sustained fixing of December cargoes. There has been no real easing of rate levels during this lull and one can only predict rates in excess of WS300 for Gulf/East and in excess of WS200 for Gulf/West.
Suezmax
Rates for Suezmax tankers from the Gulf have been maintained at about the WS300 level for voyages to the Far East. It is anticipated that such rates will be pushed upwards on the back of the VLCC market during the coming week or ten days. Similar levels are being paid for voyages from West Africa to the United States with voyages from the North Sea following suit.
The Mediterranean and Black Sea loading areas have recently been seen as hot spots and last week was no exception.
This market is still being affected by delays in transiting the choke point at the Bosphorus. Such delays have increased from 12 days a week ago to 16 days last week. Since the world cannot do without the oil supply from this area, these delays have to be endured. Last week, Suezmax rates in the region eased slightly to WS 350 but are unlikely to ease further in the foreseeable future.
Aframax
Aframax voyages from the Gulf to the Far East have been concluded at about the WS410 level, slightly down on a week ago and Indonesian cargoes are similarly being adjusted downwards by a small amount; five points or so.
A slight easing was also seen in the Mediterranean and Black Sea, but rates remain largely above the WS 400 level. In contrast, a lack of business for local voyages from the North Sea and Baltic have seen rates eroded down to WS 300, whereas voyages to the United States from NW Europe have been maintained at about WS400.
In the Caribbean, rates have varied depending upon loading dates. The normal 70,000 ton cargo sizes were concluded at WS435 at the early part of the week, WS455 in the middle and WS410 at the end. The market in this part of the world has always been volatile, so it is only living up to its reputation.
Andrew Lansdale is a shipbroker and marine consultant with more than 40 years' experience in the tanker and dry cargo markets.
Gulf News
