12 December 2019
- Short-term tonnage supply is showing signs of tightness in the 2nd half of December. The inactive fleet appears to be increasing and, in turn, is having an impact on the available cargo carrying capacity (CCC) as measured by the fleet turnaround factor. This process, known to us as CCC withdrawal, is visible in the chart below which displays the capacity utilization factor (CU%) of the active VLCC fleet. Unfortunately for the bulls on the market, we expect lower CU% factor for the first half of January. The rates are likely to follow closely.
- Both spot and forward demand for crude oil tanker capacity declined during weeks #49-50. The trend is particularly visible for the immediate (spot) demand which likely contribute to the rates weakness in the short-term. As of today, we also estimate the forward demand as flat to marginally lower. In other words, no support from stronger demand for the rates in sight. As the crude oil forward curve structure moved in recent weeks, the return on storage (RoS) improved significantly which our model considered to be an outright bullish development.
- Our macro view has somehow improved in the last couple of weeks which came as a surprise to us if we consider the strongly bearish signal streaming from the short-term credit conditions. The global FX market, on the other hand, have been somehow supportive of stronger demand for crude, and therefore shipping rates. We expect this trend to extend well into January.