These days it’s quite easy to find some sort of positive trend to look forward to, in the tanker market. One of these factors could very well turn out to be the upcoming summer Olympics in 2016, which are scheduled to be held in the city of Rio de Janeiro in Brazil. The games will be held over sixteen days in August and the event is anticipated to involve over 10,000 athletes with more than 200 nations sending participants. In addition to the athletes and support staff, the event will attract a huge number of visitors to what should be a spectacular event. Brazil will be well aware that the eyes of the world will be focused on them for three weeks, attracting a huge worldwide television audience and the government will be keen to ensure that everything runs smoothly.

According to the latest weekly report from shipbroker Gibson, “hosting such a large event is nothing new to Brazil as hosts of the 2014 FIFA World Cup. However, in comparison the FIFA soccer showcase is a much smaller event when compared to the Olympics. Back in 2014, there was a sizeable gain is Suezmax fixtures out of West Africa in the 2nd quarter of the year with larger crude volumes being imported to East Coast South America (ESA), primarily Brazil”.

In its analysis, the London-based shipbroker noted that “higher volumes of West African crude were required to supplement power generation due to the country’s worst drought in 40 years which at the time caused electricity blackouts in several Brazilian regions. Despite the fact that the Olympics will be held during Rio’s coolest month – August (average temp. 20 degrees Celsius), demand for more electricity generation and fuel to meet increased transportation needs for the world’s biggest event will be considerably higher as a result. Whilst we cannot predict the climate for Rio next August or forecast a drought, the government is likely to ensure that the nation will be showcased in the best possible light and that no power shortages are apparent to the global audience. This could translate into another increase in demand for West African Suezmax barrels in the 2nd and 3rd quarters next year”.

Gibson added that “according to the EIA, Brazil was the third-largest energy consumer in the Americas in 2014 and Brazil’s consumption of crude continues to surpass domestic production even though the country sits on 15 billion barrels of proven reserves. While over 90 per cent production comes from Brazil’s presalt deposits, deepwater offshore extraction is amongst the most expensive and the impact of a low oil price hits the nation very hard. As a result, Petrobras – the state owned oil company, has rising debt as well as being plagued by several other well publicised issues. Lack of investment in new exploration is the new drought. Petrobras’ 14 Brazilian refineries cannot meet all of the country’s needs. Brazil’s oil regulator, ANP stated last month that projected imports of gasoline and diesel will more than double in ten years from the 175,000 b/d imported during the first nine months of 2015, which will provide further support for the products market. Undoubtedly Brazil will produce a fantastic Olympiad spectacle. However, the nation continues to struggle to diversify its energy sources, so Brazil will continue to import both crude and products in larger volumes – at least in the short term”, Gibson concluded.

Meanwhile, in the Middle East market this week, it was an overall busy week for VLCCs, “but after all the initial huff, and puff, rates remained largely range bound as the market always just fell short of achieving critical mass – ongoing good availability providing the drag anchor. Rates average ws 60 to the Far East with mid/high ws 30s still in play to the West. Roughly half the December programme has now been taken care of, and the second half direction will all be about the pattern of fixing Charterers decide to employ. Suezmaxes had occasional moments to shine, but local enquiry evaporated, and it was only West African alternatives that allowed Owners to hold rates at around ws 85 to the East, and high ws 40s West. Aframaxes moved higher, as expected, and rates pushed to 80,000 by ws 125 to Singapore, aided by a fizzing inter-East market. Even stronger numbers could be seen next week”, said the shipbroker.

In the North Sea market, “an easier feel to the Aframax market here, and potential bargains were there to be had at the weeks end too. Rates operate at down to 80,000 by ws 110 cross-UKCont, and to 100,000 by ws 92.5 from the Baltic, but Charterers will be looking for even more encouragement before shopping in numbers. VLCCs got steadily picked off, and although rates have eased, there’s no embarrassment at the present $7.5 million Hound Point/SKorea, and $5.85 million levels posted for Fuel Oil from Rotterdam to Singapore. Charterers will have less choice next week, but Owners will stay reasonably compliant until/if the Caribs rebounds”, Gibson concluded.