Freight rates seen rebounding

Freight rates for the largest oil tankers are expected to rebound nearly 80% in the first half of the year, from unprecedented lows in 2010, on rising oil demand, increased Organisation of Petroleum Exporting Countries (Opec) supply and piracy concerns, a Reuters poll showed.
Global oil demand was pegged to surpass 90 million barrels per day this year for the first time, the International Energy Agency said this month, helping to drive Brent crude above US$100 a barrel and offering a much needed boost to freight rates.
“As global oil demand continues to climb, crude oil tanker demand will increase correspondingly as Opec is forced to raise production to balance the global oil market or risk crude oil prices spiking again,” said Douglas Mavrinac, shipping analyst for Jefferies & Co.
Opec said last week that it had ramped up production in January to a two-year high, fuelling demand for huge seaborne tankers.
Eleven analysts and shipbrokers surveyed this month unanimously agreed that rates for very large crude carriers (VLCCs), the largest crude oil tankers in the global fleet, would rise sharply in the first six months of this year compared with the second half of 2010.
The median of the poll showed VLCC earnings on the spot market, or time charter equivalent rate (TCE), would average US$26,250 per day in the first half of 2011.
That was up from US$14,773 in the last six months of 2010, the lowest half-year average since the Baltic Exchange began its TCE reports three years ago.
The market has already begun to show signs of recovery, with the Baltic Exchange reporting rates at an eight-month high of US$48,333 per day last Tuesday on strong Chinese demand for Middle East crude.
Rates for Suezmax tankers were expected to rise 16% to US$20,000 per day, while smaller-sized Aframaxes were seen up 19% at US$15,000 a day.
For products, the three largest categories of clean tankers would also see a jump in rates in the first half, according to the poll.
Growing political instability in Arab countries and the rising number of pirate attacks in the Gulf of Aden were also seen supporting tanker freight rates in the first half.
Suspected Somali pirates last week captured a US-bound tanker carrying around US$200mil worth of crude oil in the Indian Ocean in one of the biggest hijackings in the area so far.
“The dirty tanker market has the added benefit of long-haul voyages from west to east, Suez Canal concerns and piracy avoidance in the Horn of Africa, which is dictating longer routes and slow steaming, ” said HSBC analyst Nigel Prentis.
The industry’s recovery, however, was expected to be limited due to a flood of new vessels in an already oversupplied market.
Rates were seen remaining well below levels reached in the first half of 2010, when VLCC earnings averaged US$49,517 a day.
The global tanker fleet was seen expanding by around 10% to 450 million deadweight tonnes this year, compared with expectations for demand to rise by only 2%.
“Over the course of 2011, we expect between 40% and 50% of the existing tanker orderbook to deliver into the trading fleet against a moderate expansion of vessel demand,” said Howard Foote, analyst at Poten & Partners.

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