Freight rates rally is unsustainable

The tanker freight market rally, with rates at record highs as a result of disruptions in the Strait of Hormuz and the Persian Gulf, is unlikely to remain sustainable.

According to analysts at Poten & Partners, tankers waiting outside the region will eventually leave to seek employment elsewhere.

Middle Eastern producers will be forced to curtail production, while the reduction in global oil flows will hit demand in ton-mile terms.

Under this scenario, Poten noted, tanker rates will come under strong downward pressure.

However, tanker rates are now at historically high levels, due to a significant geopolitical risk premium, combined with a significant reduction in the actual available supply of ships.

Many ships remain stranded in the Arabian Gulf, while others are waiting for cargoes in the Gulf of Oman.

The latest data shows that VLCC tankers, which carry up to 2 million barrels of crude, are being chartered even at amounts close to or above 500,000 dollars per day.

For example, the Greek-owned “Adamadios”, a 2022 ship, was chartered at 463,000 per day for 35 days.

But the “Kalamos”, also Greek-owned, was chartered at 770,000 dollars per day for a 23-day voyage.