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Tanker market defying gravity

Tanker market defying gravity
The gravity-defying tanker market continues as we move towards the so-called traditionally weak third quarter.

Earnings for large crude tankers continue at strong levels of $40,000 to upwards of $50,000 a day. Products carriers are, if anything, doing better, relatively speaking, with LR1s and LR2s topping $30,000 a day AG/East, and MR average earnings above $20,000 a day.

If it doesn't crash soon, it isn't going to, because winter will be on us again.

Meanwhile New York maritime services company, McQuilling, has been analysing the relationship between three-year VLCC time charter rates and one-year time-charter (TC) rates. Historically, and for fairly obvious reasons, one-year rates exceeding three-year rates have meant increased spot earnings.

The higher the discrepancy, the more volatile spot earnings have been. The inverse relationship has been almost perfect. However what is interesting in the analysis is that once one-year TC earnings have crossed to the positive side of three-year earnings and remained there for at least seven months, the trend, in spot earnings, does not reverse for at least 12 months. Since the crossover occurred towards the end of last year, data from the next few months will be crucial in assessing the trend, from a technical point of view.

While McQuilling is not putting all its faith in this technical analysis - it still believes in fundamentals analysis - it says it would be remiss to ignore it.

Regardless of how you cut it, the big players are positioning themselves for growth not retrenchment. Hyperactive Euronav appears to have bought eight newbuilding VLCCs from Metrostar together, possibly with other tankers, while Gregory Callimanopoulos is reported to have ordered VLCCs in China, and Frontline undertakes another rejig of the company together with an IPO.

Technical analysis or not, the big companies are voting with their wallets.