VLCCs continue to find a greener pasture in West Africa

Catogory : Announcements

CRUDE oil exports from West Africa have continued to rise upwards as production disruptions in Nigeria have subsided. Cargoes loading in Nigeria tend to move on suezmaxes more often than crude in Angola, which is shipped on very large crude carriers to Asia.

This rise in outbound shipments from West Africa has come at a time of continued Organisation of the Petroleum Exporting Countries production cuts, from which Nigeria is exempted. More VLCCs had been loading in West Africa already in 2016 and 2017 as a result of a surplus of light sweet crude oil in the Atlantic Basin.

The main reason for the rise in cargo flows from West Africa to Asia has been the addition of light crude barrels from the US. This is an important dynamic for the VLCC and suezmax markets as these West African exports generate more tonne-mile demand for ships when they are moved to Asia.

This trend certainly has not been enough to offset the overall bear market, which is a result of tanker oversupply. It is changing the nature of the markets, though.

West African positions are looking much better in recent years, and now generating returns above those in the Middle East Gulf for VLCCs. This is due to the increased number of cargoes coming out for the ships positioned in the region.

Another factor thinning out the number of ships in West Africa is the lack of VLCC tonnage in the US Gulf. This has encouraged ships to occasionally ballast across the Atlantic to procure a cargo.

The analysis of spot market returns based on fixture date shows that this may not be the best time for VLCC owners to ballast to the region, however. History shows that Father Christmas has been good to ships sitting in the Middle East Gulf in December. This is back casting, however, and the market dynamics of steady to rising West African exports combined with continued Opec cutbacks may make a difference this year.