The extreme weather conditions experienced throughout Continental and Western Europe during the previous weeks were good news for tanker owners, especially those of the Aframax market. With similar condition prevailing during the winter season of 2009/2010, Aframax tanker ship owners witnessed that daily earnings for 80,000 tonne crude shipments in the North Sea route (TD7) were increased from zero levels in the third quarter of 2009 to an average of $27,000 per day during the first quarter of 2010. In particular, daily returns for TD7 hiked to a high of $69,000/day in March 2010 on the back of weather related disruptions.

According to London-based shipbroker Gibson, this winter season in Europe also started with icy cold weather, snow and rough seas. The anticipation of developing ice in the Baltic Sea propelled daily returns for North Sea Aframaxes from $4,000/day in the 1st half of November to $64,000/day on the 8th of December. Daily TCE earnings for ice-class Aframaxes trading from the Baltic Sea to the UK Continent (TD17) surged even higher to $71,000/day.

“Of course, the market is unlikely to average above the $70,000/day mark for a sustained period of time, but the question remains how far it is going to fall back. Rates for non-ice class trades have already readjusted, but may move up again during the cross North Sea end month rush. More importantly, if we see another cold winter this season, there is a strong possibility that over the next few months the returns in the Aframax market in the North West Europe (especially for ice class tonnage) could be substantially higher than $5,000-$10,000/day seen for most of this autumn. The official UK forecaster the Met Office said that this December will be colder than average. Likewise, the Hydrometeorological Centre of Russia expects the weather in the Baltic to be around -0.5C to -1.5C colder than usual this month. In addition, a number of UK-based independent weather forecasting agencies predict a generally colder than average winter season, with some linking this abnormally cold weather to irregular cold ocean temperatures in the Tropical Pacific (so-called La Nina conditions).

Of course, weather forecasts are quite often wrong. Yet, with the extraordinary cold weather in Europe over the past couple of weeks and temperatures recently falling to -18C in Scotland and well below -20C in Moscow, it is not difficult to envisage that we are heading for another cold winter season!” concluded Gibson’s report.

In a separate weekly analysis of tanker market conditions, Fearnley’s said, regarding the crude trades that both activity and rates for VLCCs in the MEG have been waning recently and the supply of tonnage remains more than adequate especially since most December liftings now appear to be covered. The supply of tonnage for the first few days of January seems somewhat slimmer, but we doubt that this minor shortage will have any major impact on rates. “The interest for VLCCs in WAF is thin with charterers having chosen to cover most inquiries on Suezmaxes. Suezmax rates in WAF appear to be holding, and there is some upside potential for certain date-sensitive positions. The level of activity for Suezmaxes in the Med/Bsea has been effective in maintaining rates and has also shown owners the importance of resistance rather than capitulation. With the holiday rush upon us, the Nsea and Baltic Aframax markets are looking firm; cargoes from the Nsea and Primorsk are now being worked even for end month positions, and we expect rate levels to continue strong as January lifting programmes come into play. Things were not as positive for Aframaxes trading in the Med/Bsea and rates have now slipped to the ws115 level even though Turkish straits delays have not declined. We still, however, expect a spate of cargoes prior to the onset of the holiday break, and this could bring rates out of the doldrums or at least put an end to the fall in rate levels” said Fearnley’s.

Earlier, BIMCO had forecasted that the winter season could provide a breathing space for the tanker markets. “Don’t expect rates to go through the roof as we are not in for really enjoyable spikes, but growing demand and lower stocks provide for some optimism, mostly in the product tanker segment. Freight rates for product tankers of all sizes are not expected to break the USD 20,000 per day mark during the Winter market. Once we have achieved a “strong, balanced, and sustained world recovery”, the tanker markets will look much better. Even though China has gained importance in terms of tanker demand, the US economy needs to get back on its feet before tanker demand can take off” said BIMCO.