Fresh tanker record as Reliance takes VLCC for more than $410,000 daily
The provisional deal would set fresh records for crude freight shipping costs if concluded. The last fixture for a similar route from Middle East Gulf to west coast India was reported at nearly a quarter of the latest deal
VLCC tanker earnings are now assessed at the highest levels since the Iraqi tanker wars in the 1980s
A VERY large crude carrier has been provisionally chartered at a rate that equates to more than $411,000 daily, setting fresh records for crude freight shipping costs if concluded.
Reliance is behind the deal for the 2004-built, 306,206 dwt Princess Mary, according to fixtures reported by tanker commercial pool Tankers International.
The Indian refiner agreed to pay Worldscale 400 for the tanker to load 270,000 tonnes of crude from the Middle East Gulf around April 2, for a voyage discharging at the west coast of India, likely the port of Sikka.
The deal is on subjects and has yet to be concluded but equates to daily earnings of $411,000, Tankers International reported. The last fixture for this route was reported earlier this month at W57.
VLCC tanker earnings are now assessed at the highest levels since the Iraqi tanker wars in the 1980s, after a week-long chartering spree by Saudi Arabian shipping company Bahri.
Bahri chartered at least 15 VLCCs in four days, leading to panicked traders securing a further 41 of the largest tankers, sending rates to stratospheric levels.
The Princess Mary is currently off Singapore, after loading a cargo of Venezuelan crude and sailing to an area in the region where other VLCCs are kept for floating storage. The tanker’s beneficial owner is Greece-based Andreas Hadjiyiannis, according to Lloyd’s List Intelligence.
Baltic Exchange average VLCC rates soared to $258,700 per day on Friday, up from $28,245 a week earlier. Of the 56 VLCC charters reported last week, 24 remain on subjects and a further 30 have been concluded. One deal has failed.
The highest level for which subjects has been lifted is the CNOOC-chartered Kos, at $180,000 per day, according to Tankers International as at 0830 London time. This ceiling is being watched carefully and is likely to be breached today, with some 14 VLCCs on subjects at earnings higher than this, including Princess Mary.
Bahri triggered the tanker rally after the kingdom dropped oil prices and launched a war for market share, pledging to flood the market with cheap crude. Saudi oil production will rise to more than 12m barrels per day from current levels of 9.7m barrels per day.
“The market does not need this much crude oil,” ACM Braemar said in a weekly report.
“Traders and oil producers are bracing themselves for a protracted period of lower oil prices as tensions between Saudi Arabia and Russia — the two largest oil producers outside of the US — worsen.
“VLCC period rates are higher on the back of increased oil supply; higher because of the contango market this has created, and the consequent floating storage play.
“This has similarities to four to five years earlier, with a surplus of oil on the water, and weak spot crude prices generating demand for inventory building and floating storage opportunities abound.”
The sustainability of sky-high rates is now being tested by the spreading coronavirus, which has paralysed air and land transport, leading to freefalling global demand for jet fuel, diesel, and gasoline.
“Although the new year is off to a slow start with seasonality coupled with the coronavirus, we believe the crude oil tanker market is likely to remain relatively strong in 2020 because of low global crude inventories, rising Saudi/UAE/Russian production, and tanker supply disruptions, while the refined products tanker market should benefit from increasing global refining capacity and slowing fleet growth,” said New York investment bank Jefferies in its weekly report on the maritime sector.