In line with seasonality, rates were generally low in the second quarter of 2010. Compared to the same period a year ago rate levels have improved as the global economy is regaining strength.
Influx of newbuildings, freed-up floating storage and a continued negative market sentiment kept the rates at low levels, also in a historical perspective.
In the second quarter of 2010, the fleet grew by approx. 2%. The significant delay in deliveries of new tonnage experienced in 2009 and the first quarter of 2010 continued in the second quarter, with slippage of more than 40%.
In the second quarter of 2010, the MR segment was negatively impacted by poor gasoline demand in the USA. The market players therefore sought alternative cargoes and destinations for the MR fleet, e.g. distilled oil products from the USA to South America, vegetable oil from South America to China and palm oil from Indonesia/Malaysia to the European continent.
The strengthening of the transatlantic trading route, seen late June, was partly driven by these changes in transport patterns, as this implied fewer vessels available on the European continent at the same time as the gasoline arbitrage from Europe to the USA opened.
The LR segment continued to show some strength, as naphtha demand from the Far East remained firm throughout the second quarter of 2010 despite added tonnage from newbuildings and notably freed-up tonnage from floating storage. The weaker dirty market implied that the tonnage balance was not supported by vessels swapping into dirty.
The continued reduction in floating storage during the second quarter of 2010 has impacted the tonnage supply for the larger LR vessels, and thus rates. At the end of June, floating storage has been reduced to some 3% of the total fleet, which is a more natural level. The level of and movements in floating storage are volatile and impacted by the forward curve for the various refined products.