Conditions across the three main crude sec[ds_preview]tors are causing headaches for owners with only limited opportunity for improvement before year-end
The impact of much higher fleet growth this year is being amplified by the slowing demand environment, says Maritime Strategies International (MSI). It predicts dynamics reflect lower rates of crude import growth across the year combined with reduced waiting times and, in particular, much higher deliveries.
»Firstly we are seeing a step change in delivery volumes this year, concentrated in the larger crude and products segments. Notably we have yet to see any increase in scrapping activity to counteract this, but we do expect this to pick up in H2 and 2017. Secondly the market is now operating under ›normal‹ conditions with regard to congestion and bottlenecks which were prevalent and constructive feature for freight rates earlier in 2016,« says MSI Senior Analyst Tim Smith.
The Suezmax market has been subject to supply disruptions, principally in Nigeria, where three grades of production were under force majeure in early August. In addition, Russian July crude exports fell 3.2% mom to 5.3 mill. b/d, muting activity in the Black Sea and failing to support rates against the depression in West Africa.
MSI’s spot forecast for the Suezmax segment pales in comparison to the previous two years‘ winter markets. While some uplift is expected, gains are muted and if H2 refinery throughput in Europe disappoints, the pressure from the supply-side is going to become more severe in a market which is already seeing extremely low spot rates.
Atlantic markets haven‘t been the only ones to feel the pain. In the Far East, Aframax spot earnings also hit multi-year lows in early August. Refinery maintenance has been responsible for this with high competition for cargoes in Southeast Asia.
MSI forecasts Aframax spot earnings to track their larger peers with limited upside seen in a market which is expected to remain under pressure from low crude intake in Europe,US crude import growth which has shifted away from Latin American supplies and a lacklustre near-term picture in East Asia.
Lower levels of supply-side pressure on the uncoated Aframax segment could alleviate weaker demand conditions but ultimately MSI expects the segment‘s freight market to continue to broadly track its larger peers.
