For example, the pre-Christmas rush and severe weather delays in the UK/Continent and Mediterranean forced Aframax rates up by 100% in December 2013, returning around $80,000 per day, reported Gibson Research in its weekly report.
The strong end to 2013 provided the necessary boost to take the annual average earnings to their highest level since 2010.
Earnings soon jumped again, to $110,000 per day in January 2014, as severe weather delays combined with a release of Libyan barrels, limited tonnage availability.
Despite rates having since collapsed, we still have a few winter months ahead, the broker said.
The spikes and the premium for ice class tonnage on the Baltic to UK/Continent route, over cross-UK/Continent trade, historically are most evident in March and April. Therefore, we can expect further spikes in rates to occur, leading to an overall strong first quarter, Gibson stressed.
Aframaxes in the Mediterranean face a more uncertain future. Although the El Sharara field in Libya has recently restarted, boosting the country’s production to 500,000 barrels per day, the latest reports indicate further disruptions to the country’s crude supply and exports.
In the longer term, there are some mixed signs in terms of fundamentals. The Aframax fleet currently stands at 669 vessels and at present just 3% of the existing fleet (or 25 ships) are on order.
There is the matter of heavy new ordering in the LR2 sector, which could in turn lead to migration over to the dirty trade. However, this is unlikely considering the expectations of the upturn in the clean tanker market, due to rising refining capacity in the Middle East and India.
Therefore, there is a high possibility of tightening Aframax fleet supply in the next few years.
However, concerns remain over the demand side. Crude production in the North Sea is in decline and the US requirement to import crude continues to fall, translating into less Aframax trade from Latin America. Russia is investing in some expansion of refining capacity and aims to send more and more domestic crude to the East, including overland shipments.
So, for Aframaxes, the question remains whether the expected tightening in supply will be sufficient to offset weakening demand, Gibson concluded.