Oil market transportation in 2012

In 2012, tanker market sentiment was weak in some sectors, with spot freight rates declining following a trend seen the previous year. On average, dirty* spot freight rates on reported routes declined in 2012 by 10 percent compared to one year earlier. Clean* tanker spot freight rates saw a similar decline to 11 percent. Tonnage oversupply versus lower tonnage demand along with an expansion in pipeline networks were the main factors behind freight rates dropping in 2012. At the same time, bunker fuel prices increased by 13 percent from a year earlier, lowering ship owners’ margins.

On average, dirty spot freight rates for very large crude carriers (VLCCs), Suezmax and Aframax declined by 11, 14 and 9 percent respectively, from 2011. In the clean tanker market, spot freight rates declined on both East and West of Suez, as the clean sector was influenced by the same factors affecting the dirty sector. VLCCs rates fell on all reported routes. Freight rates for VLCCs operating between the Middle East-to-East and the Middle East-to-West decreased by 10 and 16 percent, respectively, while those for VLCCs operating on the West Africa-to-East route saw a smaller drop, declining by 8 percent from a year earlier. Constant additions to fleet capacity worsened the tanker market situation as vessel supply remained ample at all times, exceeding the demand level and pushing freight rates down. This came about despite increased Asian tonnage demands, higher OPEC production and improved freight rates seen in the fourth quarter, carried by seasonal winter demand.

The imbalance between tonnage demand and supply seen on VLCCs was also apparent in other dirty vessel classes; Suezmax and Aframax annual spot freight rates also declined in 2012. On average, Suezmax spot freight rates registered the greatest drop among the dirty vessels, down by 14 percent, as a result of lower freight rates registered on both reported routes. Rates for Suezmax operating on the West-Africa-to-US Gulf Coast route and the Northwest Europe-to-US route dropped by 13 and 16 percent, respectively. Tonnage availability and lower tonnage demand were the main factors behind the freight rate drop.

Aframax spot freight rates on the Indonesia-to-East route declined by 9 percent, while rates on the Caribbean-to-US East Coast route fell by three percent. Mediterranean-to-Mediterranean and Mediterranean-to-Northwest Europe rates dropped around 13 and 12 percent, respectively. This fall resulted from a quiet market, low activity, limited delays at the Turkish straits and available tonnage outnumbering available cargo in general. Clean tanker spot freight rates followed a similar pattern to those of dirty tanker spot rates. On an annual basis, average reported routes for clean tankers declined by 11 percent from last year’s levels, with freight rates on all reported routes registering negative performance. The highest decline was seen on the Northwest Europe-to-US Gulf route which dropped by 19 percent from a year earlier, while the Middle East-to-East route declined the least, with freight rates dropping by 7 percent from the previous year.

* Dirty products: liquid products refined from crude oil, whose color is greater than 2.5 on the National Petroleum Association scale. Dirty products will usually require heating during the voyage as their viscosity or waxiness makes discharge difficult at ambient temperatures. Dirty products include fuel oil, Low Sulphur Waxy Residue (LSWR) and Carbon Black Feedstock (CBFS).

* Clean products: liquid products refined from crude oil, whose color is less than 2.5 on the National Petroleum Association scale. Clean products include naphta, jet fuel, gasoline and diesel/gas oil.

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