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Around 50 oil product tankers are idling at the ports of Singapore and Fujairah, in the UAE, on the back of a slowdown in trade and an influx of new vessels, shipping data has revealed.
The slowdown is a result of a combination of factors, including celebrations of the Lunar New Year, which are not restricted to China but take place across much of Asia, and a number of unplanned interruptions in the operation of refineries in the region, which have hurt output. On top of this, maintenance season is coming for many Asian and Middle Eastern refineries, and forward tanker bookings have declined.
At the same time, 18 new Long Range 2 tankers will be added to the regional fleet by the end of March, and this will further aggravate the situation.
For shippers, these factors have led to a slump in earnings per long-haul vessel, to US$3,000-$5,000 daily from US$16,500 daily in 2016. This is lower than shipper’s daily operating costs per tanker, which average US$6,000-8,000, according to shipping and accountancy company Moore Stevens, as quoted by Malaysia’s daily The Star.
Earlier this month, chartering data revealed that freight rates from the Middle East to Japan for one widely used class of tankers, the very large crude carriers (VLCC) fell to US$29,671 daily, the lowest since last October, again because of the addition of newbuilds to the existing fleet as well as to vessels coming out of storage. According to lobby group BIMCo, as quoted by Hellenic Shipping News, this January saw the addition of 12 newbuilds to the global VLCC fleet.
Maintenance season in the Middle East and Asia, to take place until June, will take a substantial bite from regional demand: in China alone, the drop is estimated by analysts at up to 900,000 barrels per day, which means the overall drop for the region will be well over 1 million barrels.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.