Turmoil continues

A growing number of VLCC operators are reluctant to trade tonnage at current levels, a leading brokerage told clients Wednesday.

In a weekly industry briefing Fearnleys said this is because day rates in the spot market are so low that it’s increasingly difficult for owners to break even.

“The VLCC market remains in the doldrums as charterers keep on drip feeding their requirements to the owners,” the firm said, adding:

“Charterers have for all practical purposes finished their May program ex Middle East Gulf with so far a total of about only 117 cargoes. Consequently the surplus of tonnage remains and this overhang will eventually roll into June.”

In terms of cargoes originating in the Middle East, Fearnleys said charterers are in no rush to firm up fixtures since supply is “more than plentiful” and indicated the situation is similar in the Atlantic where there is ample tonnage but two few cargoes.

While the near-term forecast looks grim optimists are quick to point out that there are a few indicators that VLCC operators will see some relief going forward.

Yesterday, RS Platou markets reminded clients that two Asian refineries controlled by PetroChina and Sinopec are offline but are scheduled for reactivation by the end of June, whch should alleviate some of pain owners have been experiencing for the past few months.

The investment bank says rates for VLCCs trading the spot market are hovering at around $11,000 per day on average, which is well below the $23,000 premium a charterer would likely have to pay if it wanted to fix a 300,000-dwt vessel for a year.

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