There is a continued decline in the percentage of the combined VLCC and Suezmax ‘employed’ fleet (defined as vessels carrying cargo, loading cargo or discharging cargo), based on our analysis of AIS movements data.
This trend, which is shown in the first chart below, helps to explain the slide in tanker rates since the start of the year which continued into early July. However, this trajectory contrasts with the trend revealed in the second chart below, which shows the combined number of employed VLCC and Suezmax vessels – as opposed to the percentage of employed vessels.
The second chart shows that the number of employed vessels started to rise from mid-May, which coincides with the moderate increase in both OPEC and non-OPEC production, before dipping slightly at the end of June.
The reason for the different trend lines can be explained by the expansion in the tanker fleet during the first half of the year. In June alone, 3.15 million deadweight was added to the fleet across all sizes, which boosted total deliveries for the year-to-date to more than 21 million deadweight. Deliveries so far this year include 29 VLCCs, 34 Suezmaxes and 34 Aframaxes.
Last month we reported that our analysis of AIS data revealed VLCCs have been consistently reducing their presence in the Arabian Gulf since the fourth quarter of 2016 (as shown in the first chart below) – a move precipitated by the OPEC-led deal to cut production, which hit Middle East production disproportionally. In June, we have seen a slight recovery in the numbers of vessels operating in the region, but at 231 vessels, this is still below the peak of 269 vessels in mid-September. The extension of the deal to cut production means that the number of VLCCs operating in the Arabian Gulf is unlikely to rise significantly.
Despite the reduced loading opportunities out of the Middle East, our AIS analysis has shown increased numbers of VLCCs arriving in Asia from early May (see second chart below). This reflects the revised strategy of VLCC owners to search for long haul loading opportunities to eastern destinations out of the Atlantic Basin from loading areas including West Africa, the North Sea, the US Gulf and Brazil.
The above is an extract from the latest monthly short-term outlook for the tanker market from Richardson Lawrie Associates Ltd (RLA), a firm of international maritime economists and business consultants. More information can be found at www.richardsonlawrie.com.