26 September 2019
- Short-term tonnage supply remains relatively tight but there have been signs of gradual accumulation since the end of last week. This recent change is best demonstrated by the proprietary “Fleet Turnaround Time Index” (see chart in full report - available on request). This will likely put some downward pressure on the rates in the short-term. On the other hand, satellite data from the AG area, which is traditionally a good predictor of tonnage tightness, remains supportive of the rates in the very short-term.
- We have been following the strong divergence between the spot (2 weeks ahead) and forward (4 weeks head) demand for VLCC for weeks. Spot demand for CCC surged 5 weeks ago which contributed to the rates rally. This was one of the key reasons behind the sudden VLCC rates rally. As the crude oil forward curve structure moved, the return on storage (RoS) deteriorated which our model considers to be an outright bullish development. RoS is now dropping again after the spike at the front end of the oil curve. The impact on the rate should be negative.
- Our macro view has somehow improved in the last couple of weeks. Credit availability on the physical commodity markets has strongly increased which is always a good sign for the demand for crude/VLCC capacity in the medium-term. It is also worth noting that our Currency Impact Index has been pointing up for 5 weeks running. This is a sign that either the economic output is stronger (bullish crude oil TMs), or there is more oil used to produce a unit of output (again bullish crude TMs).