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OPEC+ Supply Cuts Cast Shadows on Tanker Markets

Clarksons Securities, a leading shipping analysis firm, has issued a warning about the potential negative impact of the upcoming OPEC+ meeting on the Very Large Crude Carrier (VLCC) market. The baseline VLCC rate, according to Clarksons Securities, is expected to experience a significant drop if OPEC+ decides to maintain its 1 million barrel per day supply cut through 2024. In this post, we delve into the implications of these potential cuts on tanker markets and explore the broader context of the current shipping landscape.


Baseline VLCC Rates and Potential Cuts:

Clarksons Securities has projected that if OPEC+ maintains the current 1 million barrel per day supply cut, the baseline VLCC rate would fall from $84,000 per day to $76,000 per day. However, a more substantial impact is anticipated if an additional 500,000-barrel-per-day cut is implemented, bringing rates down further to $69,000 per day. Should the cuts go even deeper by 500,000 barrels per day, the baseline rate is expected to reach $62,000 per day.


Analyst Frode Morkedal from Clarksons Securities expressed concerns about the potential negative impact on tanker markets and earnings projections, highlighting the uncertainty surrounding the upcoming OPEC+ meeting.


Long-Term Outlook Amidst Immediate Challenges:

Despite the immediate challenges posed by the potential OPEC+ cuts, Clarksons Securities remains optimistic about the long-term outlook for the tanker market. This optimism is attributed to the stagnant growth of the tanker fleet in the coming years, indicating a positive trend for the industry.


Current Market Conditions:

As of Monday, the fleet-weighted average for VLCCs was $62,000 per day, marking an 8% decrease from the previous week but a 35.4% increase from the previous month. The market is approaching the seasonally stronger winter months, contributing to the positive trend.


Different Routes and Earnings:

The banking arm of the shipbroking giant assessed earnings for different routes and types of VLCCs. An eco-designed, scrubber-fitted VLCC sailing from the US Gulf to China was estimated to earn $58,700 per day. The same ship sailing from the Middle East Gulf to China was projected to earn $64,200 per day, while the route from West Africa to China was anticipated to yield $66,000 per day.


Recent Fixture and Market Activity:

The report noted a single VLCC fixture on Monday - the 299,629-dwt DHT Jaguar, chartered to Petrobras for $62,426 per day for loading in late December in Brazil for a journey to the US West Coast. This follows a flurry of activity last week, including eight deals inked on Thursday. The richest deal involved AET Tankers’ 299,554-dwt Eagle Vellore, chartered for $126,722 per day for a journey from the North Sea to East Asia for Trafigura. However, the rate drops to $69,854 per day when considered on a round voyage basis.


As we await the outcome of the OPEC+ meeting, the potential supply cuts loom as a significant factor influencing VLCC rates. While short-term challenges are acknowledged, Clarksons Securities emphasizes the positive long-term outlook for the tanker market, driven by the limited growth of the tanker fleet in the coming years. Stakeholders in the shipping industry will be closely monitoring the decisions made at the OPEC+ meeting and their subsequent impact on the evolving tanker market.

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