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VLCC rates soar 35 pct in one week

VLCC rates on the Middle East to Japan route have increased by 35 percent in just one week. Fearnley describes the increase as unusual despite the VLCC market's volatile tendencies this year.

Photo: DHT

With a 35 percent increase in just one week, the VLCC rates over the Middle East to Japan route look set to recover from the setback noted in August.

In spite of the fact that VLCC rates have been volatile throughout the year so far, Oslo-based analysts Fearnley characterize this new leap as remarkable.

"It is quite unusual. We have seen a quite volatile market throughout the whole of 2015, but this is an unusually sharp increase" Erik Chr. Myhre of Fearnley Crude Chartering tells ShippingWatch.

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However, the more remarkable development concerns the rate developments in August, rather than last week's increase.

"The rates dropped far too much, far too fast," says Erik Chr. Myhre, adding that part of the supplied tonnage has now left the market whilst, simultaneously, significant demand is emerging onto the market.

"It's the same old story of supply and demand repeating itself," he says.

Disciplined owners

US-based shipbrokers MJLR are echoing the same message, according to Tradewinds, estimating that the companies have shown discipline through the rate decline by reducing tanker capacity rates in spite of low bunker prices, which has in effect reduced the supply of vessels.

However with the recent rate increases, the speed is likely to increase again.

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"Although this would put slight downwards pressure on rates, the amount of tonnage delivered so far has remained insufficient for the growing demand for crude in the current low price environment," says MJLF analyst Court Smith to its customers according to Tradewinds.

According to GHS, the VLCC spot rate from the Middle East to Japan on Thursday 3 September stood at USD 32,163. This is a rise of 20.8 percent from the day before and a rise of 35 percent from one week ago, where the spot rate was USD 23,817.

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