From the dog house to the outhouse. The VLCC market showed signs of weakness at the end of last week, although things have gone from bad to worse in last 24 hours. This time last week owners were logging earnings well north of USD 100k/day, but with last done for the benchmark MEG/China run now standing at ws85, TCE’s have shed USD 30-40k depending on the vessel’s specs. Sentiment plays a large part, but tallying up the month of January, OPEC’s additional 500’ bpd cut has resulted in a considerable lower MEG fixture count then the previous months, and with that February has kicked off with a tonnage surplus. The US-Iran conflict camouflaged the fundamentals as oil supply fears spurred charterers to ramp up the fixing activity. However, as tensions have eased reality has hit home, and greed and fear have swapped sides. As the saying goes; the market takes the stairs up, but the lift coming down. All said and done, however, earnings are still pretty good in a historic perspective, and we don’t see the bottom dropping out of the market - fundamentally we remain bullish for the balance of the year.

Following last week's fixing frenzy, things have calmed down considerably this week. Gains made from last week have so far vanished, and owners are thus back to square one. Activity level over-all still looking good, right now it is a case of sentiment trumping fundamentals. Atlantic market is coming off, not a collapse, but a downward correction was bound to happen. Some of the reason is ballasters from the east - looking to West Africa instead of going into MEG with the political uncertainty we have there now. This also causing the east-market to remain at decent levels.

In the Baltic and North Sea market, rates have continued to come down this week. This has much to do with re-lets being in position to cover the cargoes coming into the market, leaving less activity for independent owners. We have also seen Suezmaxes come into play and take out Baltic stems. We expect the downward pressure on rates to continue into early February, unless something drastic happens. In the Mediterranean and Black Sea, we have seen benchmark routes drop 20-30 points on world scale this week, with TD19 currently trading around ws150. Although we have seen cargo activity pick up somewhat on intra-regional movements, and also a few ships fixing fuel stems and leaving the market heading East, the recent increase in cargo activity has not been sufficient to satisfy tonnage piling up in the area. We still need a few more prompt ships off the tonnage list before we can see an upward correcting in rate levels. One to keep in mind this time of year, is how the current delays in the Bosporus develop going forwards.

Still very rough seas for the big ships, with the majority of the fleet trading Far East or fronthaul and consequently earning far less than the mathematical average - same being stable w-o-w at USD 9000/day. Vintage, non-eco, non-scrubber units suffering by far the most. With historically high bunker prices, scrubber-fitted ships presently earn an extra USD 8-10k/day in comparison. Far East iron ore and coal volumes are fair but not sufficient to change a nervous spot sentiment. Atlantic and fronthaul minerals outlook is better, but still remains to be seen if live up to expectations next few weeks. Healthy period interest, but actual activity limited and much focused on index-linked levels view poor spot and forward values - representative fixtures including spot 180,000 dwt, built 2010, for about 12 months at ave5tc plus 10 pct.

This week started in the red with limited activity, but picked up during the next days as usual. Positive sentiment, especially from ECSA, has turned the index green again with new cargoes entering the market mid-week. A TA round voyage pays owners around the mid USD 7,000 per day. A fronthaul from the Continent yields around the low USD 15,000's. In the Pacific basin, a round voyage pays owners around USD 4,500 per day, while a kmx fetches around 10,000 DOP Singapore for a grain run via ECSA. The BPI 4TC-index is currently at 825 points, 22 up since last week.

The market flattening out and some more resistance from owners in the East, although still at low levels. Indo/China rv fixing around low/mid USD 6,000 bss aps Indo, while Cis rv to China talking around USD 4,500 aps. Nopac rv fixing around USD 7500 + 250k gbb aps nopac, while Aussie rv talking around low 6k dop China delivery. In the Atlantic, ECSA fh are paying around 13,000+300k gbb, while to TA to Med around USD 12,000. From Med to Wafr it is paying around USD 7,500, while fh ex Continent is paying around USD 20,000. There has been some period activity where Ultras covered short period around USD 9,500 in the Far East, while for longer periods close to 1 year, split rates are discussed roughly around 5,000 first 30 days and in the 8k's for the balance.

WEST
This week saw a continuation of last week’s bullish sentiment, albeit with fewer fixtures. The reduced rate of transactions has been a consequence of limited supply of freight rather than a shortage of inquiries, which have remained relatively prolific. Positions lists are looking very short, and some players who came into the market this week to fix were unable to find ships to cover their cargoes. As a result, rates have strengthened rapidly, and owners are now looking for around 130 Houston/Chiba depending on where in 2H Feb the laycan lies. This has also been aided by the composition of the available tonnage, with the majority of it being controlled by the main shipowners.

Going forward, it is difficult to find reasons why the market will not remain strong. However, two possible speed bumps could be an influx of trader-owned tonnage as higher rates provide more of an incentive to relet and a weakening picture on the product side; netbacks have already come off a considerable amount since the highs seen in the first few days of 2020. Otherwise, all else being equal, freight looks incredibly strong as we approach prime fog season in the US Gulf - something which could turn the market into a perfect storm.

EAST
The East also showed signs of increasing strength this week, as rates took a turn upwards towards 70 Ras Tanura/Chiba. A few candidates which had been open in the prompt and were thought to be ‘cheaper’ options are now fixed (at high rates relative to where the Baltic has been printing) or moved West, and trader relets are limited. Saudi acceptances are due tomorrow and it will be interesting to see what this means for freight moving forward; although it is thought that there will be cutbacks and delays given the situation with other Middle Eastern suppliers lately.