Tanker Rates Tumble As Last Pillar Of Strength In Oil Market Crashes

Tyler Durden's picture




 

If there was one silver-lining in the oil complex, it was the demand for VLCCs (as huge floating storage facilities or as China scooped up 'cheap' oil to refill their reserves) which drove tanker rates to record highs. Now, as Bloomberg notes so eloquently, it appears the party is over! Daily rates for benchmark Saudi Arabia-Japan VLCC cargoes have crashed 53% year-to-date to $50,955 (as it appears China's record crude imports have ceased).

In fact the rate crashed 12% today for the 12th straight daily decline from over $100,000 just a month ago...

China imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners.

China's crude imports last month was equivalent to 7.85 million barrels a day, 6 percent higher than the previous record of 7.4 million in April, Bloomberg calculations show.

China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles. The nation’s overseas purchases may rise to 370 million metric tons this year, surpassing estimated U.S. imports of about 363 million tons, according to Li Li, a research director with ICIS China, an industry researcher.

But given the crash in tanker rates - and implicitly demand - that "boom" appears to be over.

Shipbroker analysts blame fewer January cargoes and oil companies using their own vessels for shipment as the main reasons for the dramatic decline. As Bloomberg adds,

Oil tanker earnings boomed thanks to the very thing that drove down crude prices: an abundance of supply that made ship-fuel cheaper and shipments plentiful. This month, shipbrokers report a slump in spot cargoes from the Middle East.

 

While they say it would be premature to suggest that has implications for the region’s output, the plunge in rates shows just how sensitive owners are to monthly fluctuations in shipments.

The good news after all this carnage is that, even before today's plunge, collapsing tanker rates were already pushing economics for floating storage (the carry trade) closer to be proditable.

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Wed, 01/13/2016 - 20:00 | 7043103 Hohum
Hohum's picture

That makes sense if less is going to be produced going forward.

Wed, 01/13/2016 - 20:04 | 7043137 MrNosey
MrNosey's picture

And when it all collapses we will be treated to the consequences of this......

 

http://beforeitsnews.com/global-unrest/2016/01/the-lion-is-it-time-to-fi...

 

Wed, 01/13/2016 - 20:09 | 7043173 Pabloallen
Pabloallen's picture

I wish it would hurry !!!!!!!

Wed, 01/13/2016 - 20:01 | 7043107 DirkDiggler11
DirkDiggler11's picture

ANYTHING attached to the energy sector will be just PAIN for quite a while yet to come...

Wed, 01/13/2016 - 20:07 | 7043154 Wulfkind
Wulfkind's picture

Hey,.....does anybody remember that post a month or so ago where Tyler show those two tankers out to sea in the Atlantic turning around mid-trip and headinig back to port?

Was that a forward indicator ??

Wed, 01/13/2016 - 21:16 | 7043565 Fullthrottle
Fullthrottle's picture

They must have forgot some hookers, they could have continued on and got some for 5 euros in greezz

Wed, 01/13/2016 - 23:13 | 7044078 Raisuli
Raisuli's picture

Right. What was actually in those tankers? Supposedly it was diesel.

Wed, 01/13/2016 - 23:11 | 7044062 Raisuli
Raisuli's picture

If I recall correctly, it was just as Kerry and Nuland were called to Moscow. Putin and Lavrov informed their guests how things would go forward. That's when the diesel fuel tankers returned. One could imagine that the diesel was to fuel some war machinery. Why else turn them around unless you've told to back off?

Wed, 01/13/2016 - 20:07 | 7043158 nmewn
nmewn's picture

I saw a headline today that stated (rather matter of factly) that the reason the economy is crashing back into recession is...wait for it...BECAUSE OF falling oil prices.

And there ya go friends & neighbors, the economic lunatics are running the asylum.

Wed, 01/13/2016 - 20:30 | 7043295 Wulfkind
Wulfkind's picture

That's equivalent to saying that AIDS caused me to take it up the ass.

Wed, 01/13/2016 - 21:19 | 7043575 Fullthrottle
Fullthrottle's picture

But thats not what Oslima told us last night. In fact he says everything is Grreat and Trump and the likes are fearmongers. 

Wed, 01/13/2016 - 22:00 | 7043751 Dark Daze
Dark Daze's picture

You know, I have to say, for him to come out an claim 900,000 manufacturing jobs when a quarter of a million were lost, simply shows what a complete and utter useless tool he is.

Wed, 01/13/2016 - 23:29 | 7044129 Wulfkind
Wulfkind's picture

NO...NO...NO.   Don't you know Obumfuck thinks vegetables are "manufactured".  Of course they are.  And 900,000 illegal aliens manufactured them right up out of the ground.

 

Wed, 01/13/2016 - 20:11 | 7043192 R.R.Raskolnikov
R.R.Raskolnikov's picture

Offtopic: See that Nikkei 225 going: more than -3% down. It's gonna be a good week, for me at least.

Wed, 01/13/2016 - 20:13 | 7043202 Wild Theories
Wild Theories's picture

hmm, does this mean China just stopped their strategic reserve buying?

Wed, 01/13/2016 - 20:14 | 7043216 JailBanksters
JailBanksters's picture

When I hear a Cenral Banker say yes, Printing an Infinite amount of Money in a finite world, causes DE-Flation, NOT IN-Flation, it will make my day. But they won't say that will they, they can't blame Saddam, Khadafi or Obi One Laden. So it's your Fault !!!, for wanting more Pay and paying less for Goods that's the problem.

Wed, 01/13/2016 - 20:23 | 7043270 Davilis
Davilis's picture

Don't worry, there is a beautiful bullish harami on the daily WTI chart. Buy Oil Now!

Wed, 01/13/2016 - 20:40 | 7043355 Iam_Silverman
Iam_Silverman's picture

From the article above:

"Daily rates for benchmark Saudi Arabia-Japan VLCC cargoes have crashed 53% year-to-date to $50,955"

 

Well, compared to BDI rates, that's not much of a "crash".  I wonder how hard it would be to tarp up the holds of some breakbulk carriers and turn them into a tanker?  Undercut those VLCC rates by a mile!

 

Wed, 01/13/2016 - 20:48 | 7043411 Al Tinfoil
Al Tinfoil's picture

Contango anyone?

How do the spot and future prices of crude stand now?

Wed, 01/13/2016 - 20:56 | 7043466 Anopheles
Anopheles's picture

More bullshit.

The reason the tanker rates were so high a few months ago is becasue they were all being used as "floating storage", in the hope that oil prices would increase, and the owners of the oil would make millions. 

Guess what?  Oil prices didn't increase, and the people who where hording oil in the tankers LOST money.   It was a bubble, and now it's gone. 

Wed, 01/13/2016 - 21:33 | 7043637 Mewa
Mewa's picture

story is basically BS....China's last quarter had oil imports up substantially....the VLCCs were scooped up by china as floating platforms....bankers are now trying to drive storage costs down as they drive oil prices down...they need a significant spread on the futures contracts to make money less the storage costs so now they are trying to float idea of lower rates...fact is supply is going higher and market imbalance is going higher and US production is only down 400K barrels/day...not much considering the additional amounts coming on line....and with little storage space left rates will go higher which is not what bankers want.....

 

 

Wed, 01/13/2016 - 21:58 | 7043743 Dark Daze
Dark Daze's picture

Well, you know, the washouts that are happening now and will continue for some time is what everybody with any sense was screaming for, so we shouldn't be too surprised. There is/was a 35% oversupply of capacity world wide, that's a lot and it will mean a lot of bankruptcies and a lot of failed banks and all the rest that goes with that. This is the market working, although since the central banks were so interventionist the adjustments are going to be brutal to say the least.

 

Thu, 01/14/2016 - 00:55 | 7044458 tarabel
tarabel's picture

 

 

Well, China has been buying up expensive oil and storing it in expensive rental VLCCs and watching the daily spot fall and fall and fall.

Viva El Planning Centralo!!!!

Thu, 01/14/2016 - 02:42 | 7044690 GotGalt
GotGalt's picture

Rates have crashed 50%, but the peak rates were not going to last for long anyway.  Even half of that is still pretty lucrative for the VLCC owners.  Also Suezmax and Aframax spot rates are also still quite lucrative.  Even with that though there has been a large crash in the oil tanker stocks.  A few have become cheap enough again to possibly be a good trade.  NNA and NAP are two that look pretty cheap all of a sudden.

Thu, 01/14/2016 - 04:53 | 7044831 Saudi Wahhabia
Saudi Wahhabia's picture

If China buys less oil, prices will fall, everybody will pile in to buy more stock, creating very long time reserves, which will make the price go down even more, at one point, the big producers will buy all the small producers, consolidation, Iran will flood the market with massive volume of oil, prices will fall further, US and Canada oil industries will blow up first.

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