Freight rates for very large crude carriers (VLCCs), which fell to a near six-month low on Thursday, will remain weak until the Asian refinery maintenance season gets completed, starting April-end. "I haven't seen a collapse in rates like this for some time. People are taking insane rates," said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.
Output cuts by oil producers, refinery maintenance in Asia and the reactivation of older vessels previously used as floating storage have combined with a raft of new tanker deliveries and ships fresh from repair yards to dampen freight rates. "As far as demand is concerned, the next trigger is definitely refineries coming back on line," Sharma said.
More than 20 facilities in Asia-based refineries are due to restart in April or May according to Reuters refinery maintenance data. "Regenerating stocks after refinery maintenance may happen in a big way, which would give a fillip to the tanker market," Sharma added.
Supertanker charter rates on the Middle East-to-Japan route are down to about $16,700 per day, the lowest since Sept. 27, according to freight data on the Reuters Eikon terminal. But Norwegian ship broker Fearnley said two charters were fixed for voyages from the Middle East to Asia at under $10,000 per day. That is below daily VLCC operating costs of around $10,200, according to accountancy firm Moore Stephens. Breakeven costs are about $22,300 per day, top tanker owner Frontline said.