Freight futures reached the highest since 2014, with volatility pushing front-month rates 19% higher over two days. Further gains are anticipated as charterers seek to lock in prices.
Further gains are anticipated as charterers seek to lock in future prices ahead of rising shipping costs in the Middle East.
Total lots traded for crude tanker forward freight agreements totalled 12,942 for the week ending June 17, according to the London-based Baltic Exchange, against whose indices the contracts settle. Each lot represents 1,000 tonnes of freight.
Alongside clean FFAs, which did not show the same spike, total tanker FFA volumes were 16,433 lots, the highest weekly volume traded since May 2014, exchange data show.
Most of the trading was focused on the TD3 route, covering very large crude carriers shipping 280,000 tonnes from Saudi Arabia to China. The July contract gained 19% within 48 hours of the tanker attacks, data show.
The TD3 was valued at $7.846 per tonne on June 12, the day before last week’s attack, for which the US military has blamed Iran.
By last Friday the July contract had settled at $9.36 per tonne. Values for Monday have yet to be reported.
Shipbrokers reported the leap in inquiries for forward freight cover reflected escalating tension in the Middle East Gulf.
Even though the two tankers, the suezmax Front Altair and long range two vessel Kukua Courageous were carrying cargoes of naphtha and methanol, the hike in volumes was not seen for clean FFAs.
Volumes reported were 3,491 lots, up just 105 lots from the prior week. The 12,942 lots for dirty FFAs were up 8,152 by comparison.
“These are monstrous volumes,” a leading FFA tanker broker told Lloyd’s List. The tanker attack and disruption in the Middle East Gulf “had thrown a spanner in the works”.
Trading was focused on the TD3 route, and dominated by trading houses that both owned and operated tonnage, were familiar with paper, and sought to hedge their physical exposure, he said.
The numbers also reflected “lot of open interest starting to get extinguished” as counterparties also weighed the impact of the IMO 2020 regulation on rates in the third quarter, according to the broker.