China demand to drive crude tanker rates

Rates for crude tankers on key Asian freight routes are expected to rebound slightly from this year's lows as Chinese demand for West African oil returns, shipbrokers said yesterday.

For clean tankers, rates could come under pressure from an increase in vessel availability following the suspension of exports by Taiwan's Formosa Petrochemical.
The Baltic Exchange's rate for 260,000-tonne crude tankers from West Africa to China dropped to W44.87 on Monday from W47.50 last week on weak demand. The market hit a 2011 low of W44.77 last Wednesday.
Rates could get a boost as Chinese buying was expected to pick back up in the next few days, traders said.
'With the exception of term contracts, China was largely out of the West African market for the past few weeks, taking more shipments from the Middle East instead,' said a Singapore-based trader. 'China should come back this month though, with freight rates so low.'
Asian demand for West African crude grades tumbled to a near one-year low of 1.40 million barrels per day in July, but was expected to rebound to 1.59 million bpd this month, a Reuters survey of oil traders showed.
Rates on the benchmark Very Large Crude Carrier (VLCC) export route from the Middle East to Japan fell to a six-month low of W47.74 on Monday from W49.71 last week as vessel availability continued to far outpace demand.
'Adequate tonnage supply leaves little chance for any improvement in rates in the near future,' broker firm ICAP said.
On an average earnings basis, the market turned negative for the first time since the Baltic Exchange started collating earnings - equivalent data in 2008, trading at -US$1,037 on Monday from US$226 the previous session.
Rising bunker prices have cut significantly into earnings with 80 per cent of freight income used to pay for fuel on the benchmark Middle East to Japan route, up from 62 per cent in the second quarter, said broker firm Charles R Weber.
Rates for 80,000-tonne aframax tankers from South-east Asia to East Coast Australia eased to W97.06 from W97.17 last week. The market has hovered near March's lows for the past two months.
Clean rates for Long Range (LR1) tankers on the benchmark TC5 Middle East to Japan route rose to W129.19 on Monday from W128.50 last week. The market hit a seven-week high of W129.31 on Friday.
'TC5 remains between W127 and W130 levels after a quiet finish to last week,' ICAP said. 'However, it wouldn't take much for the market to firm further.'
In the intra-Asia market, medium range (MR) tankers travelling from Singapore to Japan surged to a seven-week high of W153.93 from W147.43 last week.
Rates could come under pressure this week after Taiwan's Formosa Petrochemical stopped oil product shipments due to a fire.
The force majeure on Formosa exports will increase vessel availability in the region and dampen the market's rally, traders said.
The Baltic Exchange's rate for South Korea to North America's West Coast fell to a three-week low of US$31.68 a tonne from US$32.07 last week.
Source: Reuters