Freight rates for very large crude carriers (VLCCs), which fell to multi-week lows this past week, could slip further as refinery maintenance in Asia weighs on cargo volumes and chartering activity, brokers said.
"The pace of cargoes hitting the market is much slower. This time last month there were 50 VLCC fixtures from the Middle East. There are about 30 now," said Ashok Sharma, managing director of BRS Baxi in Singapore.
"There is an unusually intensive maintenance season" in Asia this year, he said.
More than 40 facilities at refineries in Asia, including plants in China, South Korea, Taiwan and Japan, are scheduled for temporary closure due to maintenance this year. Work to around 17 is due to take place in March and April, data compiled by Reuters showed.
Rates may only recover from April for cargoes loaded in May when "refineries come out of slumber," Sharma said.
But with time charter rates at around $32,000 per day, VLCC tanker owners are in a better position than owners of smaller Suezmax and Aframax tankers where rates are around $12,000-$14,000 a day, Sharma and ship broker Clarkson said.
"Charterers are in control of the market for sure. I think as we move through March, rates will continue to slip gradually. Rates are slowly getting lower and lower," said a Singapore-based supertanker ship broker.
"There are plenty of ships coming into the fixing window and plenty of older tonnage" that will depress freight rates, the Singapore broker added.
That came as traders have released more than 12 million barrels of crude, equivalent to six VLCCs, that was being held on tankers used for floating storage in waters around Malaysia, Singapore and Indonesia, shipping data on the Thomson Reuters Eikon showed.
That has provided an opportunity for tanker owners as the crude cargoes are transported to refineries. Hindustan Petroleum chartered the 277,095 deadweight tonne VLCC Yangtze Star to carry a crude cargo being held on floating storage from Linggi, off Malaysia’s west coast, in February, to Visakhapatnam, India, a second Singapore broker said.
VLCC rates on the Middle East to Japan route dropped to around 69.75 on the Worldscale measure on Thursday, the lowest since Feb. 3, from around W74.25 last week.
Rates on the West Africa-to-China route fell to around W69.25, the lowest since Nov. 22, from W73 a week earlier.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia rose to around W107 on Thursday, equivalent to $10,309 per day and the highest since Jan. 31, from W102.50 the same day last week.
Source: Reuters (Reporting by Keith Wallis; Editing by Amrutha Gayathri)
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