VLCCs Freight Rates Set to Slide Ahead of Holidays

Freight rates for very large crude carriers (VLCCs), which are hovering close to the multi-month highs hit last week, are set to soften ahead of the Christmas and New Year holidays, ship brokers said on Friday. "It is just a question of time when the market drops down, although there is still scope for the market to top," a European supertanker broker said on Friday.

Strong levels of chartering activity - with around 70 open market fixtures in the last week - had reduced the number of supertankers available for charter. Continued firm fixing early next week could push charter rates higher, brokers said. "West Africa has been taking quite a lot of ships," the European broker said.

Chinese charterer NPI paid 74 on the World scale to hire the 314,249 dead-weight tonne (SWT) VLCC, DHT Sundarbans for a voyage from the Middle East to the NPI refinery at Yingkou, chartering data on the Reuters Eikon terminal showed. That was four World scale points higher than the prevailing index level. Brokers said NPI paid the premium because it had a prompt loading date.

"Rates have plateaued. I feel about 80 percent of the programmer for December lifting has been fixed. There could be last-minute frenzy but I don't think it will happen because traders close their books on December 15," said Ashok Sharma, managing director of broking house BRS-Baxi (Far East) in Singapore. "I have a feeling the market is going to drift down," Sharma added.

Rates are being supported by lower levels of new vessel deliveries as owners defer taking new ships from December to January so vessels appear they were built in 2017 rather than 2016. The flurry of new buildings expected to be delivered in January would put pressure on rates then, Sharma said. "Rates in the Middle East were very dependent on the type (age) of ships and destinations with spreads as high as 15 World scale points between older and the newer vessels," Norwegian ship broker Fernley said in a note on Wednesday.