Earnings in the large crude tanker sectors appear to have decoupled for the present with VLCC earnings remaining at strong levels while suezmax and aframax have collapsed from very high levels seen earlier in the northern hemisphere winter. And that is despite some charterers splitting VLCC cargoes to try and avoid the strong VLCC market.
As of mid-February VLCC earnings had almost doubled from the previous week with the benchmark Gulf/Japan route returning upwards of $45,000 a day. Suezmax earnings were heading in the opposite way with WAF/USAC returning just over $6,000 a day. Aframax earnings were also weakening, but not as dramatically, with average of several routes just under $15,000 a day according to Clarkson Research. Despite the current weakening in these two sectors, earnings for 2014 remain at very respectable levels above $40,000 a day. The equivalent average for VLCCs is just above $35,000 a day.
For aframaxes the prospects of a quick recovery in earnings appear to be quite good at least in the North Sea. Winter is not yet over as London broker EA Gibson points out. Traditionally spikes and a premium for ice-class tonnage on Baltic/UKC come in March and April. The Med is not looking so good. Despite the restart of production at the El Sharara field in Libya the country's crude production and transport continues to be disrupted.
In the longer term the prospects are mixed. Although there are just 25 crude aframaxes on order, or only 3% of the fleet, concern is on the demand side. North Sea oil production is weakening, the US is importing less and less crude. and Russia is shifting the emphasis to eastward oil delivery. Gibson considers the possibility of a migration of heavily-ordered LR2 product carriers into the crude trade but considers it unlikely as prospects for the clean products trade look good with new refinery capacity in the Middle East and India.
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