Spot tanker rates: Aframax vessels and Teekay Tankers’ outlook

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Aframax vessels

At the beginning of the third quarter, Aframax demand was stronger than expected. As a result, spot rates in these segments scaled up to new six-year highs for July.

Third-quarter-to-date Aframax RSA bookings have averaged approximately $18,600 per day—up from $15,500 per day in the second quarter of 2014. Aframax rates have improved by approximately $3,000 per day or 25% year-over-year in July.

Aframax rate

The strong Suezmax market has also had a positive knock on effect on Aframax vessels in recent weeks. Competition for cargo on trades that can use either Aframax or Suezmax tonnage has reduced.

Aframax spot rates have also benefited from regional trade disruptions, notably in the Caribbean market. The record-high crude oil inventories in the U.S. gulf, due to rising domestic production, have left the region short of onshore storage capacity.

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So lengthy vessel delays in the region reduce the pool of available vessels and support higher spot rates. On the other side of the Atlantic, repeated oil supply disruption from the political conflicts in Libya and Iraq has created uncertainty over scheduling and further contributed to Aframax rate volatility in recent weeks.

Outlook

Vessels have experienced delays of eight to twelve days during July. That obviously soaks up a lot of the tonnage supply.

Looking ahead, Teekay Tankers’ (TNK) management comments that while the current market has probably returned more to its normal third quarter levels, other than in the U.S. gulf, TNK is still holding in the mid-$20,000-to-$25,000-per-day range. The company believes that the market generally has settled back into its normal third quarter pattern with a positive outlook going into the winter months.

Key stocks and ETFs

The Guggenheim Shipping ETF (SEA) tracks TNK and its peers, Frontline Ltd. (FRO), Nordic American Tanker Ltd. (NAT), DHT Holdings Inc. (DHT), and Navios Maritime Acquisition Corporation (NNA).

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