In its first weekly briefing of the year Gibson pointed out that freight futures connected to the VLCC, suexmax and aframax segments are pointing to daily averages of around $28,250, $28,000 and $18,500, respectively, in the first quarter of 2014.
While rates are expected to plummet in the coming weeks the firm also noted that the highs the market saw in the final leg of 2013 should serve as a reminder that “there are conditions where rates and earnings can spike at extreme levels”.
“The recent surge has pushed VLCC and suezmax earnings to their highest levels in three-and-a-half to four years and aframax earnings to their highest since the economic collapse in 2008,” the brokerage explained.
“In the long term, market fundamentals win out, but in the short term, market developments and importantly, market psychology, can mean the fundamentals become an irrelevance,” the firm continued in a report entitled “Psychology Trumps Fundamentals”.
Gibson noted the recent spike in rates began in the VLCC segment at the end of October following a relatively consistent three-month period of high fixture activity in regions like the Middle East and Atlantic Basin.
“Sustained support and charterers fixing further ahead in the run-up to the Christmas holidays meant earnings were maintained at around $50,000 per day on the benchmark AG-Japan (TD3) route for the final two months of the year,” it said.
Gibson pointed out that the suezmax and aframax markets were stagnant during the better part of November, a month in which rates were hovering at around $15,000 and $8,000 per day, respectively, but started to turn in the final stretch.
“At the end of November the pressure on the VLCC market finally spilled over into the suezmax sector, with VL cargoes out of West Africa being split in to suezmax cargoes,” the brokerage continued.
“This, and the impending holidays again focusing charters’ minds in covering requirements, pushed suezmax earnings up to the VLCC level of around $50,000 per day,” it added before describing the subsequent impact on the aframax arena.
“In the North Sea, bad weather, delays, charters re-entering the market for replacement tonnage and the Christmas holidays all conspired to push spot rates to more-or-less double their earlier levels and earnings to hit $70,000 to $80,000 per day,” the firm continued.
On 2 January, Gibson says VLCCs, suezmaxes and aframaxes were enjoying daily time charter equivalents of around $40,250, $49,250 and $60,000 on average, respectively. While rates tied to the first two categories slipped, the latter watched levels increase by $23,250 week-on-week.
