West African Suezmax inquiry very slow on tepid WAF crude oil demand

Inquiries for Suezmaxes in West Africa in the past week have been extremely low, with shipping sources saying few February loading cargoes have yet been fixed.

West African Suezmax cargoes are generally fixed 14-30 days in advance of the loading date. But cargoes are currently being worked for loading in 10-15 days.

“It has been a very quiet market for the last week, there has not been a lot for the owners to sink their teeth into,” said a shipbroker.

Sources said the slow freight market is partly attributable to a West African crude market characterized by “oversupply” and tepid demand in the past few weeks.

As a result of the lack of demand for these WAF cargoes, there have been fewer cargoes on the market looking for ships despite a relatively tight tonnage list.

February loading cargoes have been very slow to sell, and with March loading programs emerging this week the market is only now seeing a slight pick-up in spot activity.

Traders said late Tuesday 10-15 Nigerian February cargoes remained unsold compared to some 25-30 at the same time last week. Differentials for almost all Nigerian crudes are at multi year lows, having fallen substantially in the past few weeks.

As a result of this overhang and the wide contango structure on the ICE Brent market, traders have also been opting to put this WAF crude overhang on floating and inland storage as end user demand has been thin.

“Some of the Nigerian crudes are clearing now. But Bonga and Forcados are struggling. Traders are also trying to put some of these crudes into tank,” said a trader.

Shipping sources say resolute shipowners and the possibility of floating storage for Suezmaxes has prevented freight rates from falling from Worldscale 92.5 for WAF-UKCM voyages — basis 130,000 mt — despite a shortage of cargoes in the market.

“It is mostly sentiment from the owners that has kept the market at w92.5 for WAF-Europe so far. There have been questions asked on floating storage which is keeping the owners’ tails up. They are quite forward focused at the moment,” said a shipbroker.

In the past month, sources estimate there have been upwards of 30 VLCCs fixed by oil companies on time charter agreements for periods of up to two years. The majority of the charterparties include an option for the vessel to be used for floating storage. This has resulted in one year time charter rates for VLCCs reaching levels close to $50,000/day. Most of the VLCCs have been fixed in the East, with Persian Gulf crudes likely to be stored on the tankers.

Shipping sources said elevated VLCC rates could open the possibility of Suezmaxes being used for floating storage, but none have yet been fixed.

“There has been a lack of space in storage tanks at the ports which is forcing the oil companies to have a rethink. There have been inquiries for Suezmaxes but I haven’t seen anything done yet,” said a shipbroker.