In October, tanker spot freight rates for dirty vessels edged up across all classes trading on most major routes ahead of winter season requirements. VLCC spot freight rates achieved the strongest growth compared with the smaller classes on the back of healthy tonnage demand on the main trading routes.
In the dirty segment, VLCC, Suezmax and Aframax average spot freight rates increased by 37%, 12%, and 12%, respectively, over a month earlier. These gains in spot rates were mostly driven by higher seasonal tonnage demand, as well as increased transit and port delays. Clean tanker freight rates dropped on all reported routes with no exception in October, dropping for East and West of Suez routes by 9% and 4%, respectively. The clean tanker market was mostly uneventful in October, while vessel oversupply persisted. Despite lower monthly rates, clean tanker rates remain well above the levels seen in October a year ago.
In October, OPEC spot fixtures dropped by 9.6% from the previous month to average 10.82 mb/d, according to preliminary data. The drop came on the back of lower spot fixtures on the Middle East-to-East and Middle East-to-West routes, which went down by 0.45 mb/d and 0.15 mb/d, respectively, in October to average 5.39 mb/d and 1.99 mb/d. In addition, fixtures outside the Middle East were down by 0.55 mb/d.
Sailings and arrivals
OPEC sailings dropped by 0.26 mb/d, or 1.1%, in October to stand at 23.69 mb/d. Middle East sailings also dropped, down by 0.16 mb/d over the previous month to average 17.11 mb/d. Crude oil arrivals increased in October at North American and West Asian ports, up by 0.4% and 4.6%, respectively, over the previous month, while arrivals in European and Far Eastern ports showed a drop of 1.4% and 2.1%, respectively, from the month before.
Approaching winter, VLCC spot freight rates showed notable gains in October from a month before across all reported routes. On average, VLCC spot freight rates soared by 37% m-o-m to stand at WS55 points, up by 4% y-o-y. Rates increased on all major trading routes, mainly on the Middle East-to-East route where spot freight rates went up by WS24 points from a month before to average WS68 points. Similarly, the chartering market in West Africa (WAF) strengthened and earnings in both WAF and Middle East were higher. The VLCC market saw high activity to eastern destinations, despite holidays in the Fareast. VLCC spot freight rates on the WAF-to-East route rose by 33% to average WS68 points. October tonnage availability saw an occasional tightening as market activities saw the usual seasonal uptick.
VLCC Middle East-to-West spot freight rates recovered, though to a lesser extent, up by 22% in October to stand at WS28 points, but remained below the level in the same month a year earlier. Generally, VLCCs saw healthy demand in October on all major trading routes though spot freight rates gains varied, with a noted difference in old and modern vessel rates.
Suezmax spot freight rates continued to rise by an average of 12% in October from one month earlier, despite an excess in ships with all replacement requirements having been met easily. Average Suezmax freight rates remained healthy, supported by higher rates registered for tankers trading on the Northwest Europe (NWE)-to-US Gulf Coast (USGC) route, which gained 8% to stand at WS60 points. Suezmax spot freight rates for tankers operating on the West Africa-to-USGC route went up by 17% from a month before to stand at WS79 points. The Suezmax market experienced occasional softer sentiment in West Africa as activity levels varied. In the North Sea, Suezmax saw limited inquiries, while rates in the Black Sea and Mediterranean were supported by vessels tightening and a spill-over effect from the firming Aframax market, which supported Suezmax demand on a part-cargo basis as a suitable alternative.
Spot freight rates in the Aframax market saw mixed movement on different routes. Average Aframax spot freight rates rose in October, although the larger vessel classes saw much stronger gains. Average spot Aframax rates increased by WS11 points from a month earlier, as a result of higher rates seen on different reported routes. The Caribbean-to-US East Coast (USEC) route was an exception, decreasing by 13% in October on persisting tonnage over supply, reversing part of the essential gains that were achieved on that route in the previous month, though remaining well above rates of October 2016.
Aframax spot freight rate gains were mainly driven by higher rates in the Mediterranean on the back of tightening Aframax availability for early November and increased transit delays in the Turkish straits. Spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes rose by 26% and 27%, respectively, from the previous month to stand at WS135 and WS133 points. Aframax rates went up despite competition seen from Suezmax vessels on part-cargo loadings. The Aframax market in the North Sea and Baltics strengthened, as rates experienced an uptick on the back of lesser tonnage availability and a busy fixing programme, with severe weather conditions and ullage problems further supporting rates.