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Freight Market
Outlook |
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A newly enhanced service that provided
an updates oil transportation balance
and freight rate forecast |
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Freight Market Outlook |
Launch entire prospectus in PDF
Overview
The record rates for oil
transportation late in 2004
caught industry participants by
surprise as did the 2006 slump
in tanker markets. Further
uncertainty looms ahead as the
complexity of the freight
markets will be compounded in
the next several years by the
proliferation of Atlantic Basin
movements to the Far East and
other non-tributary oil flows,
by a boom in tanker
construction, and by new and
tougher environmental standards
for tankers operating in
international waters, rendering
many current tankers obsolete.
These issues highlight the need
for our clients to have a better
understanding of the oil
transportation markets. To help
them, Freight Market
Outlook
(FMO), a premium service that
features an
in-depth monthly
report and innovative
online data “portal,” translates the key
assumptions and oil flows in
PIRA’s
World Oil Market Forecast
into an up-to-date oil
transportation balance and
freight rate forecasting tool.
Tracking and projecting freight
movements and rates allows FMO
clients to anticipate changes in
the availability and cost of
tonnage for different vessel
size classes and trades.
The FMO data portal, launched in
October 2007, provides
first-of-its-kind tools for an
in-depth view of short- and
long-term freight rate
information. In addition to fast
data retrieval and manipulation
at the individual user's
discretion, the portal provides
convenient access to the monthly
FMO report.
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The FMO Deliverables
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1. The Freight Market
Outlook monthly report.
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Each FMO report contains: |
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- An overview of changes in
the oil markets, especially
those with a significant impact
on transportation requirements.
- A summary of fleet capacity
assumptions, including the
impact of tanker construction
and demolition and changes in
pipeline flows.
- A month-by-month
supply-demand table for each
class, summarizing historic and
projected utilization rates.
- Commentary on recent trends
and anticipated changes in the
freight markets.
- Commentary on transportation
issues of special interest, such
as the current debate on tanker
fuel quality. The subject will
change depending on market
developments and client
feedback.
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- A freight outlook, with
historic and forecast rates for
indicative trades in each size
class as follows:
- VLCC: AG/East and
AG/West
- Suezmax: West Africa to
U.S.
- Aframax: North Sea to
Continental Europe;
Caribbean to USGC
- Panamax: Caribbean to
USGC
- Product Tankers:
Continental Europe to U.S.
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Sample table from the Freight
Market Outlook monthly report |
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2. The Freight Market Outlook
Portal
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The Freight Market Outlook Portal provides
interactive tools for an in-depth view
of short- and long-term freight rate
information. Data include PIRA's
proprietary freight cost projections,
including a breakdown of market rates
(in Worldscale) and Flat Rate
components. Near-term forecasts and
history for these items are monthly,
while long-term forecasts and history
are annual averages. The portal provides
the flexibility to download, graph and
store transportation rates for key
trades and size classes for years as far
back as 1996 and as far forward as 2020.
A key feature of Freight Market Outlook
Portal is the ability to integrate
transportation costs with data in
PIRA's
Oil Price Portal, making the Oil Price
Portal that much more powerful. Now
authorized users can incorporate
transportation economics with global
price forecast scenarios for advanced
computation of crude and product
netbacks. Only FMO clients have this
capability.
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A freight rate query result from the
FMO Portal |
The FMO Portal utilizes its proprietary
database of historic and projected oil
movements, along with a customized
transportation model to forecast freight
rates for key trades and routes. The FMO
Portal currently covers the following 18
key crude and product trade worldwide
routes: |
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Routes |
Load Port |
Discharge Port |
Vessel Sizes |
Description |
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AG to Far East |
Ras Tanura |
Chiba |
VLCC |
Very large crude carrier |
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AG to USGC |
Ras Tanura |
LOOP |
VLCC |
Very large crude carrier |
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West Africa to USEC |
Bonny |
Philadelphia |
Suezmax |
Suezmax |
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West Africa to USGC |
Bonny |
LOOP |
VLCC |
Very large crude carrier |
| Caribbean to USG |
PLC (Venezuela) |
Corpus Christi |
Aframax |
Aframax |
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North Sea to North Europe |
Sullom Voe |
Wilhemshaven |
Aframax |
Aframax |
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North Sea to USEC |
Sullom Voe |
New York |
Aframax |
Aframax |
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Black Sea to Med |
Novorossisk |
Augusta (Italy) |
Suezmax |
Suezmax |
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North Africa to Med |
Arzew (Algeria) |
Lavera (France) |
Suezmax |
Suezmax |
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AG to Far East |
Mina al Ahmadi |
Singapore |
Aframax |
Aframax |
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Caribbean to USEC |
PLC
(Venezuela) |
New York |
Panamax |
Panamax |
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North Europe to USGC |
Antwerp |
Houston |
Panamax |
Panamax |
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North Europe to USEC |
Antwerp |
New York |
38 MDWT |
Product tanker |
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Med to USEC |
Lavera (France) |
New York |
38 MDWT |
Product tanker |
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AG to Far East |
Ras Tanura |
Yokohama |
MR |
Product tanker |
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AG to Far East |
Ras Tanura |
Yokohama |
55 MDWT-LR1 |
55 MDWT-LR1 |
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AG to Far East |
Ras Tanura |
Yokohama |
75 MDWT-LR2 |
75 MDWT-LR2 |
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Caribbean to USEC |
PLC (Venezuela) |
New York |
38 MDWT |
Product tanker |
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In addition to freight rate
forecasts, users will have the
flexibility to access the FMO database
of over 38,000 spot fixtures for
worldwide trade routes, using customized
searches or pre-designed reports.
The Portal's chartering database allows
users to analyze spot chartering
activity for key trade routes and
examine trends with respect to both
volumes and the mix of vessel sizes for
designated routes.
The FMO Portal also contains the
Hire Rate Calculator, which converts
historic and forecast Worldscale rates
to a term hire equivalent for key
worldwide crude and product trade
routes. Term hire equivalent
calculations are based on prevailing
bunker prices and vessel performance
characteristics.
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The FMO Portal Hire Rate Calculator |
Users of the FMO Portal benefit
from: |
- Up-to-date short- and long-term
freight estimates including historical
data back to 1996.
Ability to define, analyze and store
custom freight routes using the Freight
Equation Manager (up to 100 custom
relationships composed of essentially an
unlimited number of terms).
- Ability to integrate transportation
costs and economics with data in PIRA's
Oil Price Portal for advanced
computation of crude and product
netbacks.
- Ability to analyze spot chartering
activity for key trade routes and
examine trends with respect to both
volumes and the mix of vessel sizes for
designated routes.
- Advanced charting capabilities.
- Exporting utility into Excel, CSV,
and PDF formats
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Methodology Behind the Creation
of FMO
The FMO relies on detailed
inter-regional crude and product flows
prepared in conjunction with the monthly World Oil
Market Forecast. Using these
flows, we then overlay a transportation
model that translates each individual
trade flow into a corresponding tonnage
requirement. For example, for crude
exports from the Middle East to India,
the model splits this stream into
separate requirements for VLCC, Suezmax,
and Aframax vessels. The calculation of
transportation requirements also
includes intra-regional flows of crude
and products, such as the movement of
North Sea crude within Europe and the
distribution of Indonesian and Malaysian
crudes within Southeast Asia.
Repeating this calculation for all crude
and product trade flows allows us to
compute the collective requirements for
all vessels in a given size class.
Requirements in each class are compared
to an updated vessel count to determine
the relative utilization rate. This
metric allows us to quantify the
supply-demand relationship at a given
point in time, to explain historic
rates, and to project rates in the
outlook period. Seasonality and weather
are also important and are thus factored
in when assessing vessel requirements.
TThe various vessel size classes compete
in certain trades (inter-class
competition), so we use reported spot
fixtures to test, and modify if
necessary, our assumptions regarding the
mix of vessel sizes in a given trade.
The freight rate forecast also draws
upon PIRA’s database of tanker rates,
transportation economics, freight
futures, and our knowledge of arbitrage
economics — all of which, in addition to
the models calculations, help develop a
story of what is happening in the
freight markets.
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The Freight Market Group
Kenneth M. Bogden
(Director, Freight Markets) develops
PIRA’s monthly Freight Market Outlook
and participates in special projects.
Prior to joining PIRA in 2005, he worked
for ExxonMobil for 27 years, primarily
in its oil supply and trading and
planning functions. He also served as
Coordinator of Transportation Planning
for Exxon International, where he acted
as plans coordinator and advisor to
senior management on oil transportation
markets. Mr. Bogden has a B.S. in
chemical engineering from Lafayette
College and an M.B.A. from Columbia
University.
Richard (Rick) Joswick
(Managing Director) develops PIRA’s
outlook for crude and products pricing,
refinery margins, and inter-regional
supply balances. He authors PIRA's
monthly European Oil Market Forecast
and participates in special projects,
including the recently released
multi-client study,
Bottom of the
Barrel: The Future for Residual Fuel Oil.
He joined PIRA in 2004 after a 20-year
stint with ExxonMobil in supply
logistics, planning, refining, and
research roles. Most recently, he was
responsible for Exxon's near-term oil
market forecast. Prior to this position,
he focused on trading and logistics,
refining economics, and heavy oil
upgrading and, as part of his work,
developed information systems in these
areas. Rick has M.S. and B.S. degrees in
chemical engineering from Rutgers
University.
Su Hyung Ryu (Senior
Analyst) focuses on crude and product
price forecasts. Ms. Ryu maintains and
develops integrated oil demand and
pricing models and information systems.
Since joining PIRA in 1998, she has
participated in numerous benchmarking
and competitive analysis projects, crude
and product marketing assessments, and
asset valuations. Prior to joining PIRA,
Ms. Ryu worked at Citibank Global
Banking, where she analyzed and
developed investment database
applications. She holds M.S. in business
computer information systems from Baruch
College in New York.
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Outlook.
Get more information on Freight
Market Outlook.
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