The tanker market ended 2018 on a soft note, as overall sentiment retreated, OPEC said in its latest monthly report. Following gains in the tanker market registered in November, a softer sentiment was witnessed in December with average dirty tanker spot freight rates relatively stable affected by a drop in VLCC and Suezmax rates from the previous month. Lower rates were seen in the larger dirty classes in December and across all reported routes on the back of limited demand. This was the result of the holiday season that led to thin market activity in general. Nevertheless, the drop was offset by higher rates registered in the Aframax class, which went up by WS15 points on average. Aframax rates were partly supported by severe weather conditions, delays and replacements in December. Clean tanker spot freight rates showed a positive performance on all routes with significant gains registered on both eastern and western direction of Suez. In general, freight rates on all routes in December were above those in the same month a year earlier.

Spot fixtures

According to preliminary data, global fixtures dropped by 7.6% in December compared to the previous month. OPEC spot fixtures were down by 1.6%, or 0.23 mb/d, to average 14.21 mb/d. Fixtures on the Middle East-to-East route averaged 8.16 mb/d in December, down by 0.18 mb/d m-o-m from November, and those on the Middle East-to-West route averaged 1.48 mb/d. Outside of the Middle East, fixtures averaged 4.57 mb/d in December, increasing by 0.04 mb/d m-o-m. Compared with the same period a year before, the increase was 0.13 mb/d.



Sailings and arrivals

OPEC sailings increased by 0.04 mb/d, or 0.2%, m-o-m in December to stand at 25.29 mb/d. Middle East sailings remained stable in December and stood at 18.50 mb/d. Crude oil arrivals dropped in December in all areas with the exception of arrivals to West Asia, which was higher by 0.01 mb/d, or 3%, from a month earlier. Arrivals to North America, Europe and the Far East declined by 0.6%, 1.0% and 2.7%, respectively, compared with the previous month.



Dirty tanker freight rates

Very large crude carriers (VLCCs)

Following the increase in rates achieved in previous months, the VLCC market showed lower tonnage demand in general in December, which prolonged the tonnage list and thus kept spot freight rates under pressure. VLCC spot freight rates were softer in December on several routes as the market was mostly quiet. VLCC freight rates on key the trading routes Middle East-to-East and Middle East-to-West fell, with spot freight rates decreasing by 6% and 7%, respectively m-o-m, to stand at WS87and WS38 points in December.



Similarly, spot freight rates on the West Africa-to-East route declined by 5% m-o-m to average WS87 points in December, influenced by the general downward trend in the Middle East. Nonetheless, despite the lower freight rates, VLCC returns were supported by a decline in bunker prices in December. On all routes, VLCC freight rates were negatively influenced by fewer cargo loading requirements and an extended tonnage list. However, VLCC freight rates on all routes in December were above those of the same month a year earlier.

Suezmax

Suezmax average spot freight rates experienced a higher drop than those for VLCCs in December. Suezmax fixing activities slowed in December, mainly in the West, thus negatively affecting the gains achieved in November. Activities in several markets witnessed a slowdown in December, including West Africa, the Mediterranean and the Black Sea. Suezmax rates dropped on average despite a pre-holiday rush, which temporarily supported rates and shortened the tonnage list that led to a significant increase in rates. However, this did not last for long, as the market rebalanced and rates were pushed back.



Rates for tankers operating on the West Africa-to-US Gulf Coast (USGC) route decreased by WS10 points m-o-m to average WS111 points in December. Rates on the Northwest Europe (NWE)-to-USGC route fell by WS6 points from the previous month to average WS95 points.

Aframax

Average Aframax spot freight rate has witnessed a strong return in previous months, which continued in December. The class was the only one in the dirty tanker segment that showed a rate increase from the previous month. In fact, Aframax earnings in December reached a level not seen for several months. Aframax rates have been partly supported by severe weather conditions and delays. Additionally, high demand for ice vessels and forwards fixing further supported rates, mainly in the North Sea and the Baltic.

In general, Aframax spot freight rates rose in December, although the levels of gains varied on different routes. Average rates were up by 10% from one month previous, with higher rates on all routes except the Caribbean-to-US East Coast (USEC), which dropped by WS22 points from one month earlier to stand at WS188 points in December.



Spot freight rates on the Mediterranean-to-Mediterranean and Mediterranean-to-NWE routes rose by 26% and 27%, respectively m-o-m, to stand at WS195 and WS183 points in December.



Similarly, the market in the east showed higher rates with Aframax spot rates rising on the Indonesia-to-East route by 3% m-o-m to stand at WS138 points.