SINGAPORE- After a frantic week that sent crude oil freight rates to record highs amid a bookings bonanza to ship Saudi oil to the world, rates are now easing as charterers balk at the nosebleed charges and await Saudi volume plans for April, shipping sources said.
At least five very large crude oil carrier (VLCC) provisional charters failed this week along with another five for Suezmax tankers, most of which were related to Saudi crude oil loadings, ship broker sources said.
"The markets have softened this week and the market is waiting to see what the April stems will hold," said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore, referring to Saudi's oil exports programme.
A surge in demand to ship the flood of crude oil unleashed by Saudi Arabia and its Organization of Petroleum Exporting Countries (OPEC) peers sent freight rates surging last week.
Saudi's National Shipping firm, Bahri, snatched up dozens of tankers mostly for late-March crude oil loadings.
Last week Bahri booked the Sea Splendor VLCC tanker for over $350,000 per day to ship Saudi crude oil to the U.S. Gulf, a possible record for that route, according to ship broker data.
Rates along that route have since eased to about $270,000, or roughly $13 per barrel of oil shipped, according to the latest ship broking data on Tuesday, but remain well above average.
"If the Saudis export the numbers they are promising to again in April, then all bets are off and freight rates will continue to rise," said Sharma.
After the collapse of OPEC's supply cut agreement with Russia, Saudi Arabia, the world's top oil exporter, said it planned to raise crude oil supply to 12.3 million barrels per day (bpd) in April.
The following month, it plans to export more than 10 million bpd. urn:newsml:reuters.com:*:nL8N2B32H4
While some ships have already been booked for early April Saudi loadings, these have mainly been on an anticipatory basis, ship brokers said.
"It's not over yet. We have to wait and see what happens in April," said Sharma.
The soaring tanker rates are eroding refiners' appetite for cheap crude oil.
"High freight killed the (refining) margins," said a source at a North Asian refiner, with the costs negating savings made from the Saudi crude oil price cuts.
"From a delivered perspective crude is still very expensive," said another source, adding that freight costs now account for almost a third of the crude oil's overall costs.
Crumbling demand for refined fuels as the coronavirus pandemic sweeps across the world has also pressured refining margins, forcing processors to slow output and contemplate extensive maintenance.
(Reporting by Roslan Khasawneh, Shu Zhang, Jessica Jaganathan and Florence Tan; Editing by Jan Harvey) ((roslan.khasawneh@thomsonreuters.com; +65 6870 3121; Reuters Messaging: roslan.khasawneh.thomsonreuters.com@reuters.net))
