Asian Crude Oil Demand Is Weak VLCC Freight Rates Hit A Six-month Low

- Mar 08, 2018-

Asian crude oil demand is weak VLCC freight rates hit a six-month low


VLCC rates in West Africa have dropped to their lowest level in the past 6 months due to weak demand from Asian buyers.

 

According to S & P Global Platts data, the 27,000-tonne VLCC Rotterdam-Singapore shipping rate was 2.65 million U.S. dollars, close to the historic low of 2.5 million U.S. dollars on August 22 last year.

 

According to sources, the VLCC tariffs in the North Sea region have dropped at the same time as the freight rates in the major markets in West Africa, limiting the need for owners to sign VLCC leases in the North Sea market. Due to the lack of demand for crude oil in the West Africa market, more and more crude oil is diverted to refineries in North-Western Europe rather than exported to the eastern region.

 

Ship broker data show that West African-Eastern Hemisphere routes have signed a 20-ship cargo agreement in March since the beginning of March, compared with 32 pen-cargo agreements in February. In the face of excess capacity and weak demand in Europe before the time, the owner has been part of the fuel transfer to the eastern hemisphere.

 

In January of this year, a total of six VLCCs obtained the Rotterdam-Singapore transport agreement. In addition, five VLCCs signed the agreement for the route in February, and four ships have already obtained the transportation agreement in March.

 

In spite of this, in the current over-supply market structure, the owner still strives to make profits for the goods. Some companies, such as NITC, use its VLCC for arbitrage between Europe and Asia. Fuel traders and shippers said the freight rates for Iran's VLCC are generally below the $ 500,000 benchmark rate for arbitrage routes between Europe and Asia. This is because the VLCCs in Iran are often neglected to repair, they are older and can not be insured. Therefore, there is often a huge discount on the tariffs of these VLCCs.