Tanker rates drop sharply in 20Q3 as fundamentals turn negative
Amid excessive global oil production and a surge in floating storage demand, tanker rates during 20Q2 were shielded from the collapse in oil trade caused by the pandemic, and instead rose to historic highs. Since then, as we expected, things have taken a U-turn and earnings on most benchmark routes have collapsed towards or below OPEX levels for much of 20Q3. Because of OPEC+ production cuts and impressive discipline by the members of the group, the oil glut of April/May, which resulted in an astounding build-up of inventories on land and at sea, is now being reversed. According to the latest estimates, oil production is less than oil demand since June and the oil market is in a deficit. Production cuts have not only put the brakes on surging oil surplus and floating storage, but they have also hit tanker trade demand, and this combination took a toll on tanker rates in 20Q3. After averaging over $90,000 per day in 20Q2, VLCC rates averaged $27,000 per day in July, before declining to less than $10,000 per day by late September. Similarly, Suezmax and Aframax rates also continued to decline over 20Q3. This paragraph is an excerpt from our Tanker eBrief released on 5 October. Our reports provide a detailed analysis of shipping fundamentals, which help you navigate in the current unprecedented market. To learn more, contact us.