Freight Market Outlook

About Freight Market Outlook

A premium service that features two in-depth monthly reports and an innovative online data “portal,” Freight Market Outlook (FMO) translates the key assumptions 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 Portal provides unique on-line tools for retrieving and downloading historic and forecast tanker statistics.  In addition to fast retrieval, site allows flexible manipulation of the data at the user’s discretion. The Portal also provides archived access to all of FMO’s reports and presentations.

Key Features of FMO and the Portal

Users of the FMO Portal benefit from:

  • Up-to-date short-term (to 2012) and long-term (to 2025) freight forecast 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 Energy 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.

The FMO Deliverables

The Freight Market Outlook monthly report.

Each report contains:

  • 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, conversions, and demolition as well as  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 debate on tanker fuel quality. The subject matter will change depending on market developments and client feedback.
  • 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.

The monthly Dry Bulk Freight Market Forecast

The Dry Bulk Freight Market Forecast analyzes the supply and demand fundamentals of coal, iron ore and steel freight markets. This monthly report, providing an up-to-date market review and forward outlook, is supplemented every third month by enhanced coverage, featuring additional data granularity, tables, and forecasts. 

The FMO Portal

The FMO 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 2025.

A key feature of FMO Portal is the ability to integrate transportation costs with data in PIRA's Energy Price Portal, making the Energy 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.

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 Portal currently covers the following 18 key crude and product trade worldwide routes:

Routes

Load Port

Discharge Port

Vessel Sizes

Description

AG to Far East

Ras Tanura

Chiba

VLCC

Very large crude carrier

AG to USGC

Ras Tanura

LOOP

VLCC

Very large crude carrier

West Africa to USEC

Bonny

Philadelphia

Suezmax

Suezmax

West Africa to USGC

Bonny

LOOP

VLCC

Very large crude carrier

Caribbean to USG

PLC (Venezuela)

Corpus Christi

Aframax

Aframax

North Sea to North Europe

Sullom Voe

Wilhemshaven

Aframax

Aframax

North Sea to USEC

Sullom Voe

New York

Aframax

Aframax

Black Sea to Med

Novorossisk

Augusta (Italy)

Suezmax

Suezmax

North Africa to Med

Arzew (Algeria)

Lavera (France)

Suezmax

Suezmax

AG to Far East

Mina al Ahmadi

Singapore

Aframax

Aframax

Caribbean to USEC

PLC (Venezuela)

New York

Panamax

Panamax

North Europe to USGC

Antwerp

Houston

Panamax

Panamax

North Europe to USEC

Antwerp

New York

38 MDWT

Product tanker

Med to USEC

Lavera (France)

New York

38 MDWT

Product tanker

AG to Far East

Ras Tanura

Yokohama

MR

Product tanker

AG to Far East

Ras Tanura

Yokohama

55 MDWT-LR1

55 MDWT-LR1

AG to Far East

Ras Tanura

Yokohama

75 MDWT-LR2

75 MDWT-LR2

Caribbean to USEC

PLC (Venezuela)

New York

38 MDWT

Product tanker

 

In addition to freight rate forecasts, users will have the flexibility to access the FMO database of over 100,000 spot fixtures for worldwide trade routes, using customized searches or pre-designed reports. The Portal's chartering database allows users to search the data using user-defined search criteria for vessel size, clean or dirty trades, charterer, and load and discharge regions to extract, analyze and download spot chartering activity. Enhanced features have been recently added to allow for better and more flexible analysis. In additions improved graphic capabilities were added.

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.

Methodology Behind the Creation of FMO

The tanker sector has been in a cyclical downturn ever since the Great Recession caused a contraction in both oil demand and tonnage demand in 2008 and 2009. The decline in tonnage demand was accompanied by a boom in new tanker construction and deliveries, which was prompted in part by the need to replace single-hulled tonnage.  For PIRA FMO clients, the downturn was not a surprise as the excessive scale of the tanker order book and limited fleet rationalization measures had been highlighted as market threats since well before the economic downturn.

PIRA’s insights into changes in oil demand patterns and trade flows provide significant advantages in forecasting tankers demand.  For example, the significant advances made in fracking technology in the past several years represent one of the most important developments in decades for the oil and gas sectors. These have allowed rapid growth in U.S. shale gas and shale crude production. This is a revolution with the potential to significantly alter U.S. and world energy balances and trade flows, including tanker balances. Meanwhile, further uncertainty looms ahead; in addition to the influences of shale production, freight market economics will be rendered more complex by:

  • Robust deliveries of tonnage ordered before the downturn despite the financial difficulties of many firms in the tanker sector and by the growing pace of tanker deletions and scrapping.
  • Operational issues such as the increasing usage of tankers in floating storage service by Iran.
  • The proliferation of Atlantic Basin movements to the Far East and other non-tributary oil flows.
  • Environmental considerations, such as IMO-mandated changes in bunker fuel quality and the establishment of new emission control areas.

FMO relies on detailed inter-regional crude and product flows prepared in conjunction with the monthly World Oil Market Forecast. Using these flows, we overlay a transportation model that translates each 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, such as the movement of North Sea crude within Europe and 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. Seasonality and weather are also important and are thus factored in when assessing vessel requirements.

The 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.

The Freight Market Group

Kenneth M. Bogden (Director, Global Oil) oversees FMO and also 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, where he acted as plans coordinator and advisor to senior management on oil transportation markets.  Ken has a B.S. in chemical engineering from Lafayette College and an M.B.A. from Columbia University.

Richard (Rick) Joswick (Managing Director, Global Oil) 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 and multi-client studies.  He joined PIRA in 2004 after a 20-year stint with ExxonMobil in supply logistics, planning, refining, and research roles.  Rick has M.S. and B.S. degrees in chemical engineering from Rutgers University.

Alan Struth (Director) has over 20 years of energy industry experience focusing on financial and industry market analysis, economics, policy analysis, forecasting and planning. Mr. Struth is a member of the International Association of Energy Economists and National Association for Business Economics. He holds a B. A. in economics from Rice University and a Master of Science degree in energy management and policy analysis from the University of Pennsylvania.

Su Hyung Ryu, (Senior Analyst) maintains integrated oil demand and pricing models and information systems for PIRA. 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 PIRA, she worked at Citibank Global Banking, where she analyzed and developed investment database applications. Su has a M.S. in business computer information systems from Baruch College.

Dr. Naing Oo (Associate Director) focuses on quantitative and econometric analysis for forecasting oil demand and prices. He is also involved in analysis on crude and product balances and trade flows. Naing holds a Ph.D. in economics from the City University of New York.

FMO Fees

FMO is available to all companies, whether or not they are existing clients of PIRA's. Clients of PIRA's Global Oil Service can receive FMO at a discount.