At Signal, we’re obsessed with counting vessels. So, we kept a close eye on vessel supply in the wake of the March 9th drop in oil prices.
Just two days after the dramatic drop in prices, on March 11, 2020, we noticed an unusually large number of VLCCs that had gone “On Subs” (i.e. were placed under contract and, therefore, removed from the available vessel supply).
We noted that there were two to three times the average number of daily fixtures compared to what we counted over the last several days and weeks.
The fixtures were both for voyages loading in the Arabian Gulf and bound for the Far East as well as for Oil storage purposes.
This increased fixture activity had an immediate effect on vessel supply and freight rates for VLCCs. As supply drops, we see a corresponding surge in rates:
The above graph is another way to visualize the surge in the number of fixtures we described above, which occurred on March 11. The number of available VLCC’s drops on one day from 71 to 45. On March 12, rates climbed from 130 WS to approximately 157 WS.
While these dynamics start in the VLCC vessel segment, they are replicated shortly thereafter across the other dirty vessel classes:
Oil prices (as of the time of writing this article) have continued to drop and are now below the level reported on March 9, 2020. We will continue to keep an eye on the ways this drop will impact the Dirty Tankers Freight Market.
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