VLCC freight rates in the U.S. Gulf are declining after last week's surge, driven by slower chartering activities and unfinalized contracts.
In the transportation of crude oil from the U.S. Gulf, a decline has begun in the spot freight rates of very large crude carriers (VLCCs) following last week's sharp rise. The slowdown in chartering activities and the inability to finalize certain contracts have led to a downward movement in tanker freight rates.
It has been reported that a VLCC in the fleet of Norway-based tanker operator Frontline has also fallen among the unfinalized chartering contracts. This development has brought discussions back to the table regarding how sustainable the tanker freight rates, which reached high levels in recent weeks, are under current conditions.
A $10 million decline from last week's peak
It has been reported that the total freight rates requested for some voyages in VLCC transportation from the U.S. Gulf have decreased by approximately $10 million compared to last week's peak levels.
This figure reflects changes in the total transportation costs for specific voyages, rather than a decrease in the daily rental income of the tankers.
The attempt of charterers to secure contracts at lower levels against high freight offers and the decrease in new chartering transactions have contributed to the market decline.
Frontline vessel's chartering connection not finalized
It has been reported that the chartering connection of a VLCC in Frontline's fleet, one of the leading crude oil tanker operators in the world, has not turned into a definitive agreement.
Pre-agreements made for the chartering of vessels in the tanker market are finalized based on the loading schedule, commercial terms, and the final approvals of the parties involved.
Therefore, the existence of a pre-agreement does not mean that the vessel has been definitively chartered for the specific voyage.
The inability to finalize some pre-agreements made at high freight levels recently has led to a reevaluation of prices in the tanker chartering market.
Decline recorded in freight indices
The decline in the tanker market has also been reflected in the freight indicators dated October 15.
The international freight index for VLCC transportation fell by 2.30% to 2,869.03 points on October 15. The index had reached 3,119.50 points on October 9.
In the assessment of VLCC transportation between the U.S. Gulf and China, a daily decline of 5.34% was recorded.
These figures indicate that the decline in freight rates is not limited to an individual chartering connection but is also reflected in the broader tanker market.
High levels continue in the tanker market
Despite the recent decline, VLCC freight rates continue to remain above the average for mid-September.
As of October 15, the VLCC freight index is approximately 61% higher than the mid-September average.
This situation indicates that, following the short-term decline, the tanker market is still operating at high freight levels.
New chartering connections to be made in the transportation of crude oil from the U.S. Gulf in the upcoming period will be effective in determining the direction of freight rates, influenced by vessel supply and loading demands.
Source: SeaNews Türkiye
