WAF VLCC rates fall over 10% on day as supply-demand fundamentals rebalance

Very Large Crude Carrier freight rates for voyages loading in West Africa fell by more than 10% on the day Feb. 21, with sources pointing to a rebalancing of supply-demand fundamentals following the significant rise in rates seen earlier in the month.

Platts, part of S&P Global Commodity Insights, assessed the rate for the key 260,000 mt WAF-East route on Feb. 21 at $26.31/mt, down 13% from $30.22/mt on the previous day.

Rates for voyages discharging in the UK/Continent region also came under pressure on the day. Platts assessed freight for the 260,000 mt WAF-UKC route on Feb. 21 at $13.09/mt, down 12% from $14.91/mt on the previous day.

The WAF-East VLCC market had firmed significantly during the first two decades of February, rising by 49% from $20.97/mt at the start of the month to hit an eight-month high of $31.28/mt on Feb. 19.

However, this bullishness was largely driven by firming sentiment due to the higher rates being paid out in the Persian Gulf and Brazilian markets, rather than concrete fixture information. The highest rate reported during this period was at w76.5 -- equivalent to $27.20/mt, using the Platts basket of routes -- for a 260,000 mt WAF-China voyage loading in mid-March, whereas the market rate peaked 14 points higher than this at w88 -- equivalent to $31.28/mt.

"The market was being heavily overpriced last week, but now there's a shortage of cargoes and the [tonnage] list is opening up with relets piling in," a London-based VLCC broker said.

"Earnings are still good -- we just reached the ceiling quickly," a second London-based VLCC broker said. "[The market] was going to come down at some point and as we look ahead there will be more tonnage available, so owners are happy to fix at well below last done levels."

The same broker added that much of the impetus for the recent spike in rates had come from "panic" over a very tight tonnage list in the Persian Gulf and a desire by charterers to fix cargoes in time for the Lunar New Year holidays. However, charterers have responded to firming owner ideas by withholding cargoes, which has caused a major slowdown in the market.