Wednesday, June 03, 2009
Wednesday, 03 June 2009
Even though MR product tankers cost three times less than VLCCs, the smaller vessels have been earning more than the supertankers in western markets, and there are fundamental factors driving product tanker rates higher and VLCC rates lower.
There has been a significant dip in cargoes for VLCCs and other types of crude carriers on the back of OPEC cuts in their crude output.
“OPEC is supposedly trying its best to cut 4.2 million barrels per day (bpd) from the market. Full compliance is equivalent to at least two VLCCs out of a job every day,” said one broker to Tankerworld.
“However, the same downturn in trade is not necessarily the case for products, where the interaction between regional refinery throughput and oil demand can lead to substantial arbitrage trades taking place,” said Gibson.
According to Gibson, the Atlantic basin gasoline market is a good example of this, “with European exports pressurizing US refinery margins to such as extent that US refiners have had to cut throughput.”
“However, US gasoline demand has started to pick up seasonally with the driving season now under-way. These factors, along with recent refinery outages, have led to US gasoline stocks falling sharply to levels lower than a year ago, which in turn has supported the market and given rise to increases in gasoline trade from NW Europe to the US.
“Add to this more gasoline trade to West Africa and Mexico, along with congestion in NW Europe and there has been enough activity to push the MR market much higher over the past 4-5 weeks,” Gibson said.
There has been no similar upswing in the VLCC markets however, even though there have been consistent reports of up to 50 vessels or close to 10% of the world's fleet being tied up in floating storage at a time.
“With VLCC earnings down and MR earnings up, we are now in the position that smaller tanker earn more than their larger counterparts. However, we should not lose sight of the fact that we are still only talking about $12,000 per day [per vessel for average MR tanker earnings],” said Gibson.
The $12,000 per day per vessel being earned by MR product tankers on average is not at all significantly higher than VLCC earnings, or earnings for crude oil tankers across the board for that matter.
According to Dahlman Rose, VLCCs, suezmaxes and aframaxes are at present on average worldwide earning between $8,000 - $10,000 per day per vessel.
Dahlman Rose in fact pegged product carriers worldwide to be earning an average of $8,000 per day per vessel only, despite rises in recent weeks.
Brokers last Friday reported suezmax earnings on the benchmark Bonny-Philadelphia and Novorossiysk-Augusta routes at some $10,000 and $15,000 per day per vessel respectively.
Aframax earnings on the benchmark TEES-Rotterdam, PLC-Texas and MEG-Singapore routes were reported at some $6,000, $5,000 and $9,000 per day per vessel respectively.
VLCC earnings last week on the benchmark MEG-Korea, MEG-UKC and Bonny-LOOP routes were reported around $8,000, $1,000 and $10,000 per day per vessel respectively.