Product tanker market has been outperforming its crude tanker counterpart –

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Clipper Dry Bulk Carrier

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The product tanker market has been outperforming its crude tanker counterpart, as fundamentals remain in the favor of ship owners. In its latest results’ report, ship owner Capital Product Partners noted that “overall, product tanker spot earnings in the third quarter of 2013 were at levels higher than in the third quarter of 2012. Strong petroleum product exports from the U.S. Gulf, stemming from increasing oil production and high refinery throughputs, continued to support the market. However, softer rates compared to the earlier part of 2013, were seen in the Atlantic as declining European refinery utilization, the lack of arbitrage opportunities and seasonally weaker gasoline imports to the U.S. exerted downwards pressure on the market” it said. Meanwhile, the product tanker period market remained active during the course of the third quarter of 2013, as more charterers sought to take period coverage and at slightly higher time charter rates compared to the previous quarter.

On the supply side, Capital Product Partners noted that “the product tanker order book continued to experience slippage during 2013, as approximately 21% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts expect that net fleet growth for product tankers for 2014 will be in the region of 3.5%, while overall demand for MR product tankers for the year is estimated to grow at 4.8%. We believe the improving demand and supply balance of the product tanker market should continue to positively affect spot and period charter rates going forward”.

The Suezmax spot market remained at seasonally low levels as increased vessel supply, reduced U.S. crude imports and lower Libyan production at the end of the third quarter put downward pressure on rates. “Slippage for the Suezmax tanker order book continues to affect tonnage supply as approximately 35% of the expected crude newbuildings were not delivered on schedule. Industry analysts expect the Suezmax tanker order book slippage and cancellations to increase going forward due to the historically weak spot market, the soft shipping finance environment and downward pressure on asset values. Suezmax tanker demand is expected to grow by 4.1% in the full year 2014 with net fleet growth projected at 2.3%”, the NY-listed shipowner concluded.

Meanwhile, in its latest monthly report on the oil and product markets, OPEC said that “clean tanker market sentiment was mixed in September as East of Suez rates gained 6% while West of Suez edged down by 16%, compared to last month. However, on average, clean spot freight rates declined by 9% from a month ago and 12% from a year earlier. In September, the clean tanker market was quiet, the general sentiment was weak and rates often remained flat”.

It added that “East of Suez fixtures continued the gain they saw last month with the Middle East-to-East route registering a 6% increase from a month ago to average 109 WS points. Additionally, freight rates for tankers operating on the Singapore-to-East route increased by 5% from August, mainly on the back of steady naphtha shipments. The higher activity on both routes supported medium-range tanker owners’ demands for higher freight rates. Westbound fixtures reported a decline on all selected routes as activity thinned, partially due to holidays in the west and few gasoline shipments from NWE to the US and the market remains oversupplied with tankers. The US Gulf had an active market occasionally during the month, however the positive trend flattened shortly as freight rates declined. Freight rates on the NWE-to-US, Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes declined by 20%, 16% and 15%, respectively, in September. The negative trend in tanker demand, which was initially seen in long-range vessels, spilled over to medium-range vessels as well”, OPEC concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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