Crude freight almost at 3 1/2-year low
The world's leading crude oil export routes came within a whisker of a three-and-a-half-year low last Friday on hefty ship supply, cuts by the Organisation of Petroleum Exporting Countries (Opec) and a mild winter, ship brokers and analysts said.
In nominal worldscale terms, brokers said very large crude carrier (VLCC) freight rates from the Gulf to Japan, the world's benchmark crude route, were trading around W52, matching a level seen in January.
Below that, W50.5 was struck in October 2003.
The steep drop has seen rates halve in a month, with VLCC transport costs diving from US$77,000 per day to an average of US$26,000. But market makers cautioned on becoming overly bearish, pointing out that rates typically retreat in this period.
'The collapse is startling, but we shouldn't be surprised - the market often takes a dive around this time of year,' tanker broker EA Gibson said in a report.
It said the seasonal concentration of refinery maintenance in Asia and the West had curtailed demand for crude.
It also said freight had come under more pressure from Asian oil companies which, in the midst of maintenance, had bloated the market with re-lets.
'Thus, the fundamentals at this time of year mean lower rates and the market psychology is such that when the fall starts, it is rapid and severe,' it said.
Other core VLCC routes, from the Gulf to the US, from the Gulf to Europe and the Gulf to Singapore were similarly close to three-and-a-half-year lows in nominal terms, they said.
'We've got lots of idle ships and more double-hulls arriving in the region, and obviously the Opec cuts,' one broker with another firm said, pointing to a weak fourth and first-quarter trading. 'We could see W40 in the next month or so,' he said.
Leading oil shipping analysts last Thursday reported Opec oil exports dropping in April. Petrologistics and Oil Movements said that reflected stronger compliance with cuts of 1.7 million bpd since November last year.
Despite the sharply lower rates, analysts and brokers said the 'real' or US dollar per tonne price on each route was still some way off busting the more than three-year target.
In nominal worldscale terms, brokers said very large crude carrier (VLCC) freight rates from the Gulf to Japan, the world's benchmark crude route, were trading around W52, matching a level seen in January.
Below that, W50.5 was struck in October 2003.
The steep drop has seen rates halve in a month, with VLCC transport costs diving from US$77,000 per day to an average of US$26,000. But market makers cautioned on becoming overly bearish, pointing out that rates typically retreat in this period.
'The collapse is startling, but we shouldn't be surprised - the market often takes a dive around this time of year,' tanker broker EA Gibson said in a report.
It said the seasonal concentration of refinery maintenance in Asia and the West had curtailed demand for crude.
It also said freight had come under more pressure from Asian oil companies which, in the midst of maintenance, had bloated the market with re-lets.
'Thus, the fundamentals at this time of year mean lower rates and the market psychology is such that when the fall starts, it is rapid and severe,' it said.
Other core VLCC routes, from the Gulf to the US, from the Gulf to Europe and the Gulf to Singapore were similarly close to three-and-a-half-year lows in nominal terms, they said.
'We've got lots of idle ships and more double-hulls arriving in the region, and obviously the Opec cuts,' one broker with another firm said, pointing to a weak fourth and first-quarter trading. 'We could see W40 in the next month or so,' he said.
Leading oil shipping analysts last Thursday reported Opec oil exports dropping in April. Petrologistics and Oil Movements said that reflected stronger compliance with cuts of 1.7 million bpd since November last year.
Despite the sharply lower rates, analysts and brokers said the 'real' or US dollar per tonne price on each route was still some way off busting the more than three-year target.