Low freight rates are deterring owners of very large crude carriers (VLCCs) from hiring out their vessels to take Atlantic basin crude on long-haul voyages to Asia-Pacific, according to shipbrokers.
Many VLCC owners are unwilling to offer their tankers for long-haul shipments to east Asia because they do not want to be locked into a low rate for the rest of the year ahead of an expected upturn in the market in the northern hemisphere winter.
"Nobody wants to fix in a long run at the bottom of the market," one shipbroker said. VLCC owners are only considering long-haul voyages if charterers pay a premium, another shipbroker said.
Freight rates for VLCC shipments to China from the US Gulf coast, west Africa and Brazil were over $800,000 lower in April-June this year than the January-March average, and they remain close to one-year lows this month, driven by a combination of seasonally weaker demand for vessels during the northern hemisphere summer and Opec+ production cuts.
It has prompted owners to try to keep their vessels in the Atlantic so they can take advantage of higher long-haul rates when they do arrive. In the meantime, owners are benefitting from strong demand for Atlantic basin crudes in Europe, particularly US grade WTI. VLCCs carried more oil from the US Gulf coast, Brazil, Guyana and west Africa to Europe in June than in any other month this year so far, according to data from Vortexa.
Rates for long-haul eastbound journeys from the Atlantic could tick up as the Opec+ cuts support Chinese demand for Atlantic basin crudes and competition for vessels intensifies.
