Friday, 4th June 2010

Flat rates heading north again

With only four months remaining before the bunker price that feeds the 2011 flat rates is published we should have a reasonably good idea of how they will look.

Friday, 28th May 2010

Have LR2s got what it takes?

LR2s have been looking pretty hot this past month, relative to the rest of the market. The sector has
benefitted more than any other from floating storage of gasoil and jet; crude trades have been soaking
up a growing number of coated units and, to top it all, LR2s are the natural choice to handle expanding demand for Middle Eastern naphtha in the East and more recently an opening arb for naphtha from the Middle East to Europe.

Friday, 21st May 2010

Product Tankers TCs back in vogue

As witnessed by the attached fixtures report, this week has seen a marked improvement in the volume of business concluded on the time charter front in the product tanker sector.

Friday, 14th May 2010

Demand at a Glance

This week’s downward revisions for oil demand in 2010 by the IEA – its first in 5 months - disguises what is actually a more optimistic view on the health of the world economy.

Friday, 7th May 2010

Singles Abound

April proved something of a disappointment for d/h owners after March’s soaring levels of single hull ‘recycling’. The sale this week of five single-hulled VLCCs s to dry bulk operator Vale provides some encouragement, and perhaps an indication of things to come, but we still have a stack of single hulled vessels to plough through.

Friday, 30th April 2010

Upbeat mood lifts assets

Criticism of the value of the VLCC tonnage in Saga’s recent usd 120m private placement in Oslo maybe overstated. There is some cynicism over the inflated price of usd 67 million put of the 2 Blystad VLCCs the 'Agnes' and the 'Julie' - sold into the Blystad-generated company Saga tankers and the subsequent purchase price of the Sanko Unit.

Friday, 23rd April 2010

How did we get here?

Two years ago (April 2008), we were expecting the crude tanker fleet to grow by 9.6m dwt during that
year. In fact it grew by 2.4m dwt. At that stage we had no idea quite how much tonnage conversion
buyers would suck out of the market. By happy coincidence, however, we estimate that the ‘useful
crude carrying capacity’ did grow by about 9m dwt thanks to increased sailing speeds and the defection
of some coated tankers from clean to dirty trades to take advantage of stronger rates.

Friday, 16th April 2010

First Quarter Surprises

Average TCE spot market round voyage returns for the first quarter of this year have come in well above what most people were expecting to see half way through last year.

Friday, 9th April 2010

Fixing windows: cause and effect

We all know a relationship exists between how far forward charterers are fixing VLCCs and the strength of the market. But can the forward fixing window tell us anything about where today’s rates are heading?

Thursday, 1st April 2010

Easter bunny hop for crude freight

From such quiet beginnings to a short week the crude market has burst into action. VLCC rates jumped from the mid W70s to mid W80s. Thanks to last month’s high volume of spot fixing in the
Middle East, tonnage was tight up to mid month. Charterers dutifully trotted in to cover before the
Easter break, not that Easter really registers as one of the big Eastern holidays.

Friday, 26th March 2010

$20,000 to become a pirate

Being attacked by pirates is one of many risks, insurable or otherwise, that ship operators will face from time to time. You do what you can to avoid attacks: you skirt the areas the pirates infest; you travel in the company of other vessels. You learn a few tricks to shake them off when alongside. But you won’t stop pirates having a go, and you probably won’t stop a few of them getting away with it. This was the rather unsettling message that Rob Andrew, a piracy expert, delivered to ACM’s chartering clients in a presentation this week.

Friday, 19th March 2010

The pitfalls of counting fixtures

More VLCCs have apparently been fixed on the spot market to load in the Middle East this month than
at any time since October 2008. As tempting as it is to conclude that oil demand is surging, it is more
likely to be doing quite the opposite.

Friday, 12th March 2010

A big draw on distillates

The past week has witnessed the biggest draw yet of distillates from floating storage. In oil terms we have seen 17.13m bbls (or 24.1%) of gas oil removed, almost entirely in North West Europe, and 2.33m bbls (or 20.5%) of jet.

Friday, 5th March 2010

Different Expectations

More and more we hear our clients quoting the FFA forward curve as a reference for the direction of the physical market developments and not only as a tool to manage risk and hedge exposure. The front 4 qtrs traded in FFAs should tell us the expected TC rate, we hear more frequently stated and used as an argument.

Friday, 26th February 2010

The (a) Grand Unifying Theory

Despite a recovery in recent months, global oil demand is still some 1.3m b/d short of its peak at the end of 2007. Fleet growth since 2007 has required crude tankers to lift 2.84m b/d more crude, and product carriers to lift 5.92m b/d more products. So how on earth is almost every tanker in the world fleet still fully employed?

Friday, 19th February 2010

The Great Shift East

The Atlantic basin is awash with oil, yet Asia can’t get enough of it. Oil companies are therefore rapidly
shifting their focus. New pipelines are being built; flow of existing pipelines is being reversed; national
oil companies are swapping Western storage capacity for tankage in the Far East; Eastern owners are hoovering up the world’s tanker fleet. What could this all mean for long-haul tanker trades?

Friday, 12th February 2010

Ignore ton-miles at your peril

The question was raised this week as to whether the loss of tanker demand from Europe and North
America was being compensated by growing demand from China. Despite what the relative oil
consumption numbers suggest, the answer is a resounding ‘yes’ – but unfortunately for tanker owners, that’s not the whole story.

Friday, 5th February 2010

Storage update

Here are our latest numbers on oil in floating storage, showing our projection for oil coming off storage over the next two weeks.

Friday, 29th January 2010

Intermediate tankers: a prognosis for 2010

Though the global economic slowdown has clearly hurt the intermediate tanker sector (10,000dwt to 17,999dwt), the seeds of its decline were sown back to 2004. As a result it will take more than economic recovery to make up for past mistakes.

Friday, 22nd January 2010

VLCC rally: down but not out

The gains of the last ten days on VLCCs have quickly evaporated. As far as we can make out, that’s
largely down to sentiment.

Friday, 15th January 2010

Product Carriers: A prognosis for 2010

The cold northern hemisphere winter has picked product carrier earnings off the floor. Demand has
improved, weather delays have upset loading programmes forcing charterers to rush through
alternative arrangements, and ice class tonnage is at long last receiving premium rates. But not all the news is good. The rise in heating oil demand and hike in freight rates (particularly for Suezmaxes) has sucked gasoil out of floating storage, and if this begins to push LRs back into the spot market we will soon see greater competition for spot cargoes. Here is our view of how things will pan out over the course of the year.

Friday, 8th January 2010

VLCC: A prognosis for 2010

As the VLCC market starts to move, we look at the sector’s prospects for 2010 and against most peoples' expectation, conclude that we could see some strength returning to rates this year.

Friday, 25th December 2009

Beware January Deliveries!

January 2010 is shaping up to be a very busy month for newbuilding tanker deliveries. Generally weak
market conditions have already pushed a large number of 2009 deliveries into 2010. This trend has
accelerated in recent months as the appeal of a 2010 build date outweighs the benefit of participating in the small upswing in December rates. A good deal of this tonnage will come on stream in January, which we expect will put downward pressure on rates.

Friday, 18th December 2009

VLCC market strength explained

The VLCC market in recent times has strengthened and owners are fetching returns that for the most part of the year could not match. Supply/Demand enonomics are more in balance than they have been for many months and this has helped owners lift this market out of the doldrums. There has been constant demand for VLCC’s storing both Crude oil and Clean Petroleum Products.

Friday, 11th December 2009

Copenhagen: bad news for tankers?

The ‘peak oil’ debate has always had an inherent weakness. If and when conventional oil supply does eventually struggle to keep up with demand, the rising price of oil will justify the exploitation of more energy intensive ‘unconventional oil’ – Canadian tar sands and the like. But what if governments decide next week that the ecological cost of doing so is too high?

Friday, 4th December 2009

What can VLCCs earn?

With three weeks to go until the end of 2009 it looks like round voyage earnings for VLCCs trading
between the Middle East and Japan (TD3) will come in at an average of around $24,000/day for the
year. That’s $62,500 less than some paper players were willing to gamble in the summer of 2008, and $18,000 per day less than the numbers being talked this time last year. Other than proving that paper traders are no better than the rest of us at predicting the future, do these numbers mean anything in the real world?

Friday, 27th November 2009

China’s 145 VLCCs

An article in TradeWinds today informs us that by 2015 China will require 145 VLCCs. Quite by coincidence, that’s probably not far off the mark. The latest available statistics suggest that China’s crude imports were back up to 4.5m b/d in October – just shy of their highest ever level in July this year.

Friday, 20th November 2009

Before we get too carried away...

Judging from what we read in the papers, the market still seems to believe that 90 single hull VLCCs will need to be replaced at some stage next year. On the basis that 85 newbuildings (max) will deliver between now and the end of 2010 this suggests, as a number of commentators have pointed out, that the VLCC fleet is about to shrink. We have a few problems with this.

Friday, 13th November 2009

A few changes to the report this week...

Fleet Statistics: until now we have been estimating net fleet growth for each sector as a %. From this week we show how we arrive at our numbers – i.e. the number of newbuildings we expect to deliver each year Vs. the number of older ships we expect to see removed (either scrapped/converted or simply never again moving oil around the world).

Friday, 6th November 2009

Flat rates fall 21.5%

The 2010 Worldscale flat rates for the main BITRA routes have been released. With the exception of small changes to voyage distances, all components of the flat rate are now transparent. Next year’s flat rates show an average decrease on 21.4% on 2009 levels.

Friday, 30th October 2009

Structural product trades under threat?

In an ideal world an oil refinery would be able to chose feedstock according to its relative value, and tweak its product yield according to changing consumption needs. Fortunately for product tanker owners, it rarely works out like that. But with refining capacity now expanding faster than demand - and forced to address a massive overhang of distillates - this could be about to change.

Friday, 23rd October 2009

A positive spin on storage

No one disputes that floating storage hangs like a sword of Damocles over the tanker market. The only debate concerns when it will fall. It was, in fact oddly still is, broadly accepted that a narrowing contango would spell the end of the storage bonanza. But storage charterers for crude oil, where the contango for WTI and even Brent has been virtually non-existent for some time now, still employs 30 d/h VLCCs. So why does the market now insist more fervently than ever that storage is a spent force? If anything, we believe the opposite. And the sooner owners realise this, the sooner they will be able to challenge the dire returns they are forced to accept.

Friday, 16th October 2009

It's Life Jim...

When we last counted ships at the end of May this year we could see little reason to predict a rally in
VLCC earnings. This was despite our conviction that peaking demand for floating storage and the
growing inefficiency of the VLCC fleet had actually left the market reasonably well balanced. The
problem then, as we saw it, was sentiment. But since May oil demand has rebounded fast, while floating storage volumes have held steady. This week’s WS 5 point rise on TD3 suggests the owner’s mood could at last be lifting. Could the VLCC market turn?

Friday, 9th October 2009

VLGC owner questions 'market-related' logic

The past 12 months have been particularly difficult for VLGC (very large gas carriers) owners. Idle time has been a constant feature of the market as average spot returns have hovered around $5-7,000 / day. It is easy to conclude that owners have simply ordered too many ships. But according to one large lpg owner, that's not the only 'own goal' VLGC owners have scored.

Friday, 2nd October 2009

Storing up trouble

Forecasting tanker supply is a tricky business. If you simply balance projections for newbuilding deliveries against a projected phase out of s/h tankers you can at least not be proved too wrong. The problem is that the 'ships in / ships out' model only paints part of the supply picture. Here, at the risk of being ridiculed in a year's time (or less) we try to paint it all.

Friday, 25th September 2009

MRs undervalued?

If past earnings indicate that VLCC earnings could fall further next year than the paper market suggests it will (as we argued last week), they would also suggest that paper has under priced MRs.

Friday, 18th September 2009

$25,000/day next year?

This week we are dropping our one year TC rate for a VLCC from $34,000/day to $31,500/day. The paper market is more bearish still - it expects $25,000/day to be a more realistic number during 2010. But with the spot market for VLCCs averaging just $8,000/day for the past three months - could even paper be aiming too high?

Friday, 11th September 2009

China : using oil or hording it?

It won’t be long before China overtakes the US as the world’s biggest employer of crude oil tankers. That presents a problem for those charged with forecasting tanker demand.
As this month’s large upward revision in Chinese 'apparent' oil demand (refinery output plus net oil product imports, adjusted for fuel oil and stock changes) from the IEA highlights, nobody really knows what to expect from China. This is largely because no one (outside the Chinese administration, one would hope) has much of an idea what is happening right now.

Friday, 4th September 2009

Will scrapping help?

Recycling of older single-hulled tankers (and one double-hulled tanker) has gathered pace this week with another two VLCC and three MR1s heading for the beach. The combination of weak freight market, attractive scrap prices ($370/ldt), a gloomy medium-term market outlook, depressed second-hand prices and limited conversion opportunities* will see more go. But with so many new ships entering the market, a high level of scrapping is essential. We fear it won’t, it itself, be enough to lift the market.

Friday, 28th August 2009

Time to go

Bangladesh is currently talking around $380 per lightweight ton for large tankers. If owners were
planning to ‘recycle’ their single hulls, or older double hulls for that matter, at any stage in the next two
years, now would seem a good time to do it.

Friday, 21st August 2009

Gift horses: where to look

In February this year chartering tankers to store clean products was almost unheard of. Today, traders
are storing over 100 million barrels of distillate at sea. But despite this mass exodus of capacity from
clean spot trades into floating storage, clean rates have continued to plummet. Could this be about to change for LRs?

Friday, 14th August 2009

Never underestimate Asia!

We made the mistake in 1997-98. We made it again in 2001. This week's second quarter economic growth statements suggest we may have underestimated Asia's ability to bounce back once again.

Friday, 7th August 2009

Appeal necessary?

With the tanker market generating very low returns since spring, and an apparent consensus that things aren’t looking up in the short term, scrapping of old tonnage should be rising on the tanker owner’s agenda. But is it?

Friday, 31st July 2009

Structural Decline of Fuel Oil?

For years the total volume of fuel oil transported has fallen because of substitute feedstock, mainly gas and coal. This was at least in part balanced by the ever increasing fuel oil consumption of the growing fleet of vessels hauling the goods around the world. But the economic downturn, reduced shipping activities and the anticipated shift of bunkers from heavy fuel to middle distillates during the next 10 years has apparently left fuel oil demand heading for structural decline.

Friday, 24th July 2009

Where's that 'globalised' products market?

Wasn't the global trade in refined products going to explode in 2010? Weren't some 50 new refineries going to start up, most of them in developing countries, and most of those designed to feed burgeoning demand in the rich world. Wasn't it next year that the long-haul product tankers were to take over the show?

Friday, 17th July 2009

Close but no cigar

This chart – extrapolated from BP’s annual statistics on world oil trade – gives an idea of the complexity of the world’s product trade and the limitation of forecasts based on oil demand growth alone. But does it say anything useful about the future?

Friday, 10th July 2009

IEA spies recovery, of sorts

The IEA’s first monthly report to include an outlook for oil demand in 2010 suggests growth will return
next year to the tune of about 1.4m b/d. So by the end of next year we would have clawed back about
half the demand we lost over this past 12 months. Two years of growth at that level and we’ll be back to where we were before the crisis hit. The only problem is that by then, failing some major shipyard
failures, we could be sitting on 36% more product carrier capacity and 32% more capacity to move crude oil.

Friday, 3rd July 2009

Intermediate tankers: when is enough enough?

We’ve got to hand it to the intermediate tanker fleet – it can take a beating! As the fleet statistics below
make clear, chemical and product tankers between 10,000 dwt and 17,999 dwt should currently be
dragged under by a tide of newbuildings. This year will see 230 newbuildings added, equivalent to 27% of the existing fleet, making the intermediate sector by some margin the most overbuilt of all tanker classes this year.

Friday, 26th June 2009

When?

This is the most popular word in today’s world. When will the market pick up in a sustainable way again? This is the question mostly discussed with our clients. This discussion is always centred around the next important question: Did the TC market bottomed out? Will we see lower rates then the rates we asses in the moment and which form part of this report?

Friday, 19th June 2009

Houdini would be proud

For anyone scratching their head as to how dumping the equivalent of half a day’s global oil consumption from floating storage into the US and Europe over the past few weeks has failed to depress oil prices, this graph provides a good answer. But could it also show the way for tanker owners to cheat this recession?

Friday, 12th June 2009

Does this rally have legs?

VLCC spot earnings have jumped some $30,000 a day over the past two weeks. In the history of bear markets, there is nothing unusual about this. We've had three or four jumps of this magnitude since last July only to see the market drop away as quickly as it rose. None did anything to halt the decline in time charter rates or asset values. But this rally feels different.

Friday, 5th June 2009

Long-term charters are back

This week Koch, S Oil, BP, Petrobras and Reliance have come into the market with TC enquiries for 18 months or longer. This marks the end to well over a year of drought for long-term period activity on VLCCs and Suezmaxes. But what does it tell us about where those markets is heading?

Friday, 29th May 2009

Do the maths...

We have lost about 10% of VLCC demand since last autumn. This is a rough calculation
based on the number of reported spot fixtures loading out of the Middle East, and
assuming 3.3m bpd of production lost – almost all out of the Middle East. This equates
to about 50 fewer VLCCs required to move the world’s oil.

Friday, 22nd May 2009

Fat lady singing on storage?

Oil prices have jumped 85% since February. Odd, you might think – given how far oil demand has fallen. But in our view this rally is not about today’s fundamentals. It is about what happens when the recovery comes, and it assumes storage will bridge the gap until it does. If this is indeed the case, could this then mean that contrary to what has been suggested these past few weeks we have yet to see the peak of storage charters?

Friday, 15th May 2009

To "V" or Not To "V"

Alas, despite a concerted effort of wishful thinking by most in our industry, we have not witnessed an improvement in VLCC owners’ malaise. Current Spot employment from MEG has continued to ebb and flow in the $3,000 – 7,000 / day range, whichever point of the compass one seems to be ordered for discharge. Not exactly mesmerizing. For those fortunate to be in the west and able to secure west African barrels for destination to the U.S. , earnings are in the region of $13,000 – 15,000 / day.

Friday, 8th May 2009

Not such a paradox

The worse this VLCC market gets, the more attractive the sector becomes – or so it would appear. While the spot market continues to be beaten into submission, tanker company stocks are rising healthily and forward freight contracts are changing hands at increasingly lofty levels. So is this a reflection of renewed confidence in the sector, or simply recognition of how bad things currently are?

Friday, 1st May 2009

Luck or judgment?

Friday, 24th April 2009

How low can you go?

Our time charter team reckons one year TC rates are now, on average, half what they were in October last year. Though spot rates have surfaced after their recent dunking, charterers still clearly believe time charter levels have further to slide. So when will they finally judge the bottom has been reached?

Friday, 17th April 2009

Recession 101

This is not the 1980s. But as rates tumble, owners will doubtless be leafing through their note books to see what they did the last time they faced such a rapid build up of prompt tonnage, and such a bleak market outlook.

Thursday, 9th April 2009

Different Times

The tanker market is very different today compared to a year ago. Returns in the spot market have dropped considerably during the last two weeks. Rates for all sizes of crude oil tankers are down 75 product carriers have not escaped this either, down by an equivalent margin. This comparison needs to be looked at with a certain amount of caution, as it only shows a snap shot in time and does not show the substantial annual volatility in spot rates and returns, but it still makes gloomy reading.

Friday, 3rd April 2009

Big brains provide hope

A recent ‘poll’ of oil analysts conducted by Reuters suggests that oil prices will hold at current levels for the rest of this year, rise to about $66 per bbl in 2010 and rise again in 2011 to $79 per bbl. What interests us in all this guesswork is not the numbers themselves, as frankly there is not a hint of consensus among the institutions polled, but the possibility it raises that the low point in the oil market has been reached.

Friday, 27th March 2009

Still want your newbuilding?

Some clients have been asking how yards are coping with their commitment to build, and owners with their commitment to take delivery of the second largest tanker order book in history. This is what we are picking up...

Friday, 20th March 2009

A tough quarter ahead for VLCCs

March 2009 was one of the lowest levels of VLCC liftings for many a year. It looks like the final figure will be sub 80. So how do we explain that? Well, yes, because OPEC is adhering much better than usual to output pledges. They were already 80 per cent of the way towards achieving their 4.2m b/d target cut when they convened last week. But the bigger question is how they are able to hold it together so well. The temptation to go outside the agreement is still strong.

Friday, 13th March 2009

Europe's tariff rocks biodiesel trades

European biodiesel blending targets were supposed to improve ecological sustainability and reduce dependence on foreign imports (notably of crude oil). This week’s imposition of tariff’s on Europe’s biodiesel imports from the US shows just how difficult that second goal is to achieve. Fortunately for the shipowner, it will take a lot more than that to stamp out a growing transatlantic trade in biofuels.

Friday, 6th March 2009

US oil demand to the rescue?

Like it or not – and despite the best efforts of China to steel the limelight – the USA still takes centre stage when it comes to tanker demand. As the trigger (and accelerant) for the world’s current economic woes, the US therefore shoulders much of the blame for bringing an unprecedented 6‐year tanker freight rally to a shuddering halt. But does this mean we have to wait for the US economy to bounce back before tanker demand returns? There are two reasons to think not.

Friday, 27th February 2009

Bulls Vs. Bears – Our Take

Hopefully you are all familiar with out market outlook presentations by now. They typically start out with a look at the key short, medium and long‐term market movers; their likelihood; and their potential impact on freight for each sector of the world fleet. The world and his dog seems now to be convinced that freight is heading south, so what better time to remind you that there are still diverging views out there – views that are, in our opinion, still worthy of serious attention.

Friday, 20th February 2009

Who's afraid of the big bad orderbook?

With the world needing less oil, it will need fewer ships to move it. For this to happen existing ships will have to be removed faster than new ships can be delivered. And for this to happen, we all agree, the orderbook will have to shrink. But how likely is this?

Friday, 13th February 2009

Market commentary

Today’s TC estimates on most of the tanker sizes have been marked down again. This is a continuation of a general trend which started back in July/August 2008, and which now has accumulated in an average TC rate loss of between 25 and 35 percent. This sharp downward correction is not only closely correlated to the reduction in asset prices, but additionally very similar on average in percentage terms.

Friday, 6th February 2009

VLCC rebound next year?

The VLCC market peaked earlier, and rather less impressively, than we thought. It now looks unlikely owners will claw back lost ground for the balance of the year. That’s the bad news. But on the bright side this could well bring forward the scrapping of single hulled tankers, which could in turn help rates rebound considerably earlier than we expected.

Friday, 30th January 2009

Market commentary!

You will have noticed that over the last two weeks we refrained from writing a preamble to our period report. This was not down to a lack of interest, laziness or a lack of imagination. Sometimes, silence is golden and it is often better that we slowly and carefully try to analyse this market in the right context with the surrounding macro economic developments of energy consumption and transportation, combined with the expected fleet development in the next two years! 

Friday, 23rd January 2009

Market report 23rd January 2009

Read more…

Friday, 16th January 2009

Market report 16th January 2009

Read more…

Friday, 9th January 2009

Charterers swallow new flat rate without blinking

What a week it has been! It started with many believing that the year would start much the way the last one ended spread out of the Middle East has all been squeezed into this week and, though it took until Thursday for it to take real effect. When it happened, the market shot up.

In fact soon after Worldscale 60 had been fixed on last year’s flat rates, Worldscale 60 was paid on the new Worldscale flat rates. With a 38 percent increase in the flat rate from 2008 to 2009 that’s a 38 percent jump in the V market almost overnight!

Friday, 2nd January 2009

The Reliance Effect

On December the 25th Reliance formerly commissioned its new 580,000 b/d refinery in Jamnagar. It won’t be until April that the plant gets up to full production but these next few months will give us a good idea of how trades for both crude oil and refined product will be affected. Impatient as always, here’s our latest guess as to how it will change the landscape for product (and crude oil) tanker trades.

Friday, 19th December 2008

Are you watching the right war?

Friday, 12th December 2008

Who will win the capacity war?

OPEC is poised to dramatically reduce the number tankers needed to move the world’s oil. Oil companies and traders, meanwhile, are rapidly reducing the number of tankers available to move it. Whichever emerges as the stronger force could have a profound impact on freight rates across the size spectrum. Unfortunately we know neither the precise number of tankers chartered (or simply used) to store oil, nor the scale of (or perhaps more importantly the level of compliance with) output cuts that OPEC is likely to pledge when it meets on the 17th.

Friday, 5th December 2008

Could LRs gain from Eastern products spilling West?

Despite slowing gasoline demand, high distillate cracks in 2008 caused refiners to maximize distillate production and export as much of it as possible, along with any surplus gasoline produced along the way. Overly-fixated on the tidal wave of new buildings bearing down on us, we didn't see that coming. What we'd expected to be a tough year for product carriers has turned out to be one of the strongest on record.

Thursday, 27th November 2008

Drivers of short-term freight: a progress report

With party season fast approaching, what better time to update a few of the bull / bear arguments we have raised in recent weeks.

Friday, 21st November 2008

Here's one for the geeks

Since the Sirius Star was hijacked 450km off the coast of Somalia earlier this week owners have been falling over themselves to avoid pirate infested waters. In reality this could mean anything from transiting the Red Sea in a navy convoy to avoiding the Gulf of Aden altogether. Indeed it could also mean nothing at all.

Friday, 14th November 2008

Have VLCCs been robbed of their swan song?

There is little doubt that OPEC cut backs in November are sucking the strength out of the VLCC market. If the price of oil continues to slide, further OPEC cutback pledges will come in December, suggesting VLCC rates will fall again. To the VLCC owner this must all seem just a little unfair.

Friday, 7th November 2008

Will the real optimists please stand up

The tumbling dry bulk market is polarising opinion in the tanker sector. One camp believes tankers are following bulkers into the abyss. The other is gearing up for a new wave of investment. There is no middle ground.

The drybulk market has certainly got the tanker owners in a spin. The fire sale of dry bulk assets is now in full swing. This week saw the first big-fleet casualty of the credit crisis as Allocean's parent company Allco went into administration. It joins Britannia Bulk Holdings, bankrupt after failing to sell off its fleet. Just the top of the iceberg, we are told. In fact if rumours are to be believed dry FFA margin calls could have claimed another four victims - some seriously big hitters among them - floored by a massive combined loss of $2.1 bn.

Friday, 31st October 2008

Build it, and they will come

The world fleet of small MRs will barely change over the next few years while the fleet of larger MRs is expected to grow by 40 per cent. A small MR costs significantly less than a large MR to built yet they will earn about the same in today's market. So why is hardly anyone building small MRs?

The easy answer is that MR cargoes are getting bigger as the centre of gravity for new MR business shifts East. But should ships always be built in response to changes in the parcel size charterers prefer to trade?

Friday, 24th October 2008

The arbs will be there, but will the traders?

Right now, trust is in alarmingly short supply among traders of physical or paper oil contracts. The collapse of Lehman's; the restructuring of the world's blue-chip banks and now the fear of an Argentinean or Pakistani default amidst worsening economic turmoil have all got traders spooked. For clean product tanker owners, this does not bode well.

Friday, 17th October 2008

And back to the dark side

Where there’s a silver lining, there’s a cloud. Despite the fact that our markets have real upside potential, as we explored last week, we still believe the bear arguments outweigh the bull.Driven by suppression and in some cases the outright destruction of oil demand, and compounded by strong fleet growth, our hunch is that this market will struggle to maintain its strength into next year.

Friday, 10th October 2008

A look on the bright side, for a change

Any chance we could emerge from this crisis unscathed? The question comes with an air of
desperation nowadays. Perhaps surprisingly (coming from us) the answer is a resounding yes.
It’s a slim chance, but we’re willing to accept that the right combination of factors, all well
within the realms of possibility, could keep both crude and product tanker markets buoyant for
the next two to three years.

Friday, 3rd October 2008

Market report 3rd October 2008

Today, the Worldscale Association announced that the bunker price to be used in the 2009 flat rate
calculation will be $554.05/ metric ton. This represents a 68% jump over last year’s price and we estimate it will have the following impact on flat rates for the main BITR Routes…