The challenging freight market during the third quarter came
despite some encouraging signs with active scrapping of vessels
returning (nine VLCCs scrapped plus one removed from fleet for
FPSO project; six Suezmax scrapped during the third quarter)
incentivized by a steel price at near three-year highs, says
This was supported by continued upgrades to crude oil demand with
the IEA raising its forecast for 2017 from 1.2 mbpd to 1.6 mbpd
over the course of the third quarter and U.S. crude exports again
making further progress to record on average 933k bpd for the
However, the VLCC order book continued to expand with 13 new
orders placed during the third quarter largely outpacing this
re-emergence of sector discipline in scrapping.
The expected seasonal low level of cargoes during the third
quarter combined with thirteen new VLCC and fifteen new Suezmax
deliveries during the quarter drove freight rates to low levels
not seen since the third quarter of 2013 and approaching
operating cost break-even levels.
OPEC production cuts have recently been accompanied by more
assertive and selective crude export reductions. Combining
potential extension of production cuts to the end of 2018 and the
recent rise in geopolitical concerns in specific oil producing
regions (Kurdistan, Nigeria and Libya), could provide negative
headwinds to ongoing crude oil supply.
Paddy Rodgers, CEO of Euronav, said, "Freight rates remained
under sustained pressure in both the VLCC and Suezmax sectors
during Q3 - particularly in August as seasonally low levels of
cargo and new tonnage entering the market combined to drive rates
to lowest levels since 2013."
"Whilst there has been an encouraging recent uptick in scrapping
activity and crude demand growth continued to see upgrades during
the quarter, the delivery schedule of new vessels remains
elevated into late 2018. Euronav retains substantial balance
sheet capacity and fixed income visibility to navigate through
such a period of lower freight rates and/or to take advantage of
So far in the fourth quarter of 2017, the Euronav VLCC fleet
operated in the Tankers International Pool has earned about
$26,000 and 45 percent of the available days have been fixed.
Euronav's Suezmax fleet trading on the spot market has earned
about $16,000 per day on average with 56 percent of the available