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The cargo volume in the Middle East in November may hit a new high for the year, thus shrinking the capacity of the spot market. The confidence of the shipowners in raising the price of tankers is encouraged, and the optimism of the VLCC market is fermenting.
Up to now, there have been 120 pallet transactions. In addition, shipping analysts estimate that a small number of pallets will be delivered to the market later this month. Therefore, the cargo volume this month is expected to reach 130, or it will hit a new high for the monthly volume.
According to Marex Spectron data from Singapore's freight derivatives brokerage, the market hit a high of 129 single delivery orders in April this year.
Brokers are still not sure why the volume of the region is rising, but some brokers believe that capacity demand from China is the main driver.
Whatever the reason, one thing is certain, the higher volume has already tightened the excess capacity in the Middle East and raised the ship's bargaining power.
The broker believes that the positive sentiment of the current market will continue, which is undoubtedly a great comfort for the VLCC shipowners who have experienced the continued downturn in the freight rate in the last four months.
On Tuesday (8th), the VLCC December contract price of the Middle East Gulf to East Asia round-trip benchmark route issued by the Shanghai Stock Exchange closed at W57, up 12% from the W50 level a week ago. This level is higher than the spot market freight rate. On Wednesday, the Saudi Arabia-Japan TD3 line freight rate was reported to W54.8 (TCE was US$4,417/day).
Some analysts admit that the shipowner's daily income is even higher, because the exchange rate estimates do not consider the factors such as modern tanker slow flight and fuel efficiency improvement, which will help improve the shipowner's income.
For example, the London ship brokerage firm ICAP gives a TD3 round-trip benchmark route shipyard daily income of about $4,500/day. Norwegian Arctic Securities analysts sailed on a tanker and sailed at 10 knots, and the shipowner's revenue was as high as $11,700 per day.
A London VLCC agent pointed out: "The shipowner's enthusiasm is high, the market sentiment is optimistic, and the upside is open, so the winter market is just around the corner." This suggests that the winter of the northern hemisphere is likely to bring about an increase in oil demand. However, Moore Stephens accountant estimates that the cost of a ship owner operating a 300,000 dwt VLCC is approximately $10,670 per day. Therefore, despite the improvement in market conditions, the revenue of VLCC shippers carrying crude oil pallets in the Middle East cannot be significantly increased.
The broker commented: "The current VLCC market has not fully recovered."
Last week's fuel price increase also contributed to higher freight rates. Because the increase in fuel costs will inevitably increase the cost of shipowners and dilute the shipowner's income. Affected by this, shipowners have to ask for higher freight rates to make up for the increased cost of fuel increases.
In terms of market capacity supply, the Marex Spectron report shows that the region will have 61 ships in the next month, which is nearly 20 times less than Tuesday. In the previous months, the available capacity was as many as 100.
Aside from the market's upswing performance this week, the new oil tanker orders are piled up next to the city, and the 570 VLCC fleets around the world will welcome about 140 new members to be delivered by Asian shipyards.
This will increase the fleet's excess capacity. Some analysts pointed out that excess capacity can only be solved by a large number of old ships.
A broker calmly commented: "Overall, the market capacity is still surplus, and the oversupply situation is difficult to change in the short term."