BIMCO expects that after the high seasonal demand and the effect of sulfur restriction on boosting the market, the freight rate of oil transportation will be under pressure again. 6.3% of the original tanker capacity growth and 4.8% of the finished product tanker capacity growth will have an impact on the balance of supply and demand.
Demand drivers and freight rates
VLCC earnings soared to $3078800 per day on October 11, but in the weeks that followed, they fell as fast as they rose. After the decline, daily earnings were $7468100 on November 1, the highest level since the beginning of 2016, excluding the most recent peak.
So, what caused the October rate rise? It is simply a combination of geopolitical influence and refinery demand for crude oil before the sulfur limit order of January 1, 2020.
At the geopolitical level, the tightening of U.S. sanctions on specific tankers and shipping companies, as well as restrictions on Iranian and Venezuelan crude oil exports, and tensions in the Persian Gulf and the Red Sea have had a significant impact on the market.
In addition to these factors, the supply-demand balance foundation of the market has not changed, so the freight peak is not sustainable.
Although it is reported that the daily income is more than $300000, it is rumored that the surge is only temporary, and those contracts with daily income of more than $200000 have not been fulfilled.
The smaller crude tankers experienced a similar surge in freight rates, with Suez's daily earnings reaching $159.257 million on October 11, higher than the peak in 2009; aframax's daily earnings reached a high of $60181 million a week later.