The Tanker Market from the Monthly Report October 2008
With a back-drop of steeply falling equity markets, tumultuous credit markets and an overall pessimistic economic outlook, the tanker markets in October have fared quite well. Despite absolute world scale rate drops across the board for the better part of the month, tanker owners have benefited greatly by the steeply retreating bunker prices (from nearly $800/mt this summer to some $300/mt today).
This has enabled VLCC earnings to remain solid above $50,000/day and likewise respectable across other classes. Despite this, expectations for Q4 and beyond are being revised down somewhat and we will be left to see to what degree transportation demand and fleet growth might be impacted by the current economic situation.
With May through June of this year recording some of the highest tanker rates ever, we saw rates in steep decline for the better part of August. An end to Iranian crude storage in the AG, seasonal slackening of demand for refinery maintenance/turnaround, a decrease in Eastern inventory, and yes, quite possibly some consumer demand erosion due to high crude/product pricing all seem to have taken some toll on shipping demand.
Down but not out, the end of August has seen some rebound off the bottom for tanker rates. Many of the factors that have conspired to make this year one of the bestever for owners - more double hull fixing in the AG, high levels of FO/crude moving from West to the East and strong increase of exports from Brazil and East Med, are still strong driving factors that have not gone away.