June 28, 2019

The Research Team reviews the VLCC market


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28 June 2019

  • Short-term tonnage supply expanded sharply this week as displayed by our proprietary “Fleet Turnaround Time Index”. This is likely to fuel the decline of the rates further as it indicates that cargo carrying capacity is being added to the market. The AG area which is traditionally a good predictor of tonnage tightness is still pointing the opposite direction (tightness) but we expect this to change as we enter into the new week.
  • Both spot (2 weeks ahead) and forward (4 weeks head) demand appears weak. This trend is countered by the improving incentive for long-haul oil imports into China. Despite the adverse trading conditions from the position of T/Ms due to China/USA trade war, the deeply negative crude oil import spread started to close after week #21.
  • We remain cautious regarding the improving short-term macroeconomic environment. Credit availability on the physical commodity markets is of particular concern. Credit conditions in China have improved recently but we fear that this will not be sufficient to inspire concentrated buying of raw materials (oil and others) in the medium-term. It is worth mentioning that the energy intensity in key crude oil consuming nations continues to increase after bottoming early in Q2. This is a positive development which continues to provide support to the freight market.



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