West Africa-China VLCC route hits two-month high

The cost of sending crude oil from West Africa to China on VLCCs has hit a two-month high due to a strong Persian Gulf market, sources said. The WAF-China VLCC route, basis 260,000 mt, was assessed this week by S&P Global Platts at $16.16/mt, the highest in two months, since the route was assessed at $15.40/mt on February 16.

VLCC rates have firmed rapidly in the last three weeks in particular and the WAF-China route, basis 260,000 mt, has risen from $11.42/mt on March 28 to reach $16.16/mt on April 19, an increase of $4.74/mt.

The driving force behind this surge in rates has been the strong Persian Gulf market, which has very tight tonnage for the May 1-10 loading window and has seen rising rates, deterring vessels from ballasting up to West Africa, according to one ship owner.

However, West Africa has seen record export volumes for the last three months and this ties up a lot of tonnage because ships fixed from West Africa are out of the market for 70-80 days at a time when they take cargoes to China.

VLCC exports have been consistently high for the last three months and February and March both saw 37 VLCC cargoes going East and to India.

For April, 35 were recorded and so far 20 VLCCs have been taken in WAF for May, according to shipbroking sources.

Charterers in the Caribbean and West Africa are now looking at splitting VLCC stems onto Suezmaxes as the cost of VLCCs is such that it is more economical to fix two smaller stems, according to shipbroking sources.