Asian spot freight rates for mid-sized clean tankers loading from the Middle East continued a slide on Monday versus week-ago levels, as naphtha loadings remained thin for January.
Freight Forward Agreements (FFAs) on the route for February were pegged at W120 levels, about 2 points below closing levels seen on Friday. Shipbrokers anticipate the FFA values to drop further at Europe's close on Monday, as tonnage supply continues to increase amid slowing demand.
"There just doesn't seem to be anything getting done from the Middle East into Asia, although there was a lot of buzz from traders complaining about weather-related delays. But we didn't see that," a Singapore-based shipping broker said. Higher exports from India in February and March are expected to reduce bookings seen on this route.
A total of 225,000 tonnes of naphtha is expected to be exported via several Indian tenders next month. Naphtha demand has also come off in the region, as reflected by prices which on Monday came off their three-year highs seen last week. Shipbrokers now were anticipating demand to stream in from Europe and United States which are expected to see a heavy refinery maintenance schedule over the next few months.
"What we could see are East-West arbitrage options opening up for diesel and jet fuel, which could see the employment of excess LR2 tonnage in the market," a shipbroker said. In the week ended January 26, a total of 235,000 dead-weight tonnes of clean tonnage or 3 LR2 tankers were booked into Europe.
But it was still unclear if these tankers were carrying baseload barrels or spot requirements needed to cover an anticipated shortfall due to the refinery turnarounds there. The bookings for the Promise, Elka Aristotle and Athinea were made by Glencore and Morgan Stanley and an undisclosed trader.
Despite healthy demand for inter-regional bookings, rates continue to ease due to poor global arbitrage opportunities, as stock levels continue to bulge due to slackening demand amid a relatively mild winter.
"We have seen some sporadic dip in temperatures, but it hasn't been long enough to have caused a significant draw down on winter oil stocks, plus we are already going into the tail end of winter now," a shipbroker said.
Supplies of distillates, in the United States, that include heating oil, diesel and jet fuel, grew by 700,000 barrels in the week ended January 19 the Energy Information Administration said in its weekly report last week.