APPENDIX H Seasonal Variations in Tanker Demand and Freight Rates1

The committee has examined and identified the degree of seasonal variation in the pattern of oceanborne oil shipments and freight rates in the major tanker trades.2

A monthly seasonal variation index for crude oil exports from the Arabian Gulf (past Hormuz) was computed.3 The average for the year was defined as 100. A significant degree of seasonal variation is evident from the data presented in Table H-1.

The seasonal index of oceanborne crude oil movements from the Arabian Gulf for the 1990 to 1995 period shows a seasonal high of 102.38 in December and a low of 97.05 in April—that is, a spread of 5.3 percent. The average index for the first five-month period from April through August is 98.21 and for December through March, 101.27. An average seasonal variation of 5 percent in oil shipments is not at all surprising and does not suggest a great seasonal impact on tanker demand. However, if tanker supply is in the inelastic range, the impact of seasonality on freight rates is considerable.

The seasonal variation indices for freight rates of very large crude carriers (VLCCs) trading from the Arabian Gulf to Rotterdam between 1970 and 1995 indicate a pronounced seasonal variation of considerable amplitude (Table H-2). These results support the notion expressed earlier that a small (5 percent) change in tanker shipments can result in a large (47 percent) change in freight rates, consistent with the supply inelasticities discussed in Appendix G.

1  

Computations of seasonal indices were performed at the Massachusetts Institute of Technology, Department of Ocean Engineering, Ocean Systems Management, by William Gassman.

2  

Data on crude oil exports were provided by PIRA, April 16, 1996.

3  

Data on freight rates were compiled by Maritime Overseas Corporation based on source material from Fearnley's Oil and Tanker Markets. Quarter 4, 1995, and earlier issues.



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--> APPENDIX H Seasonal Variations in Tanker Demand and Freight Rates1 The committee has examined and identified the degree of seasonal variation in the pattern of oceanborne oil shipments and freight rates in the major tanker trades.2 A monthly seasonal variation index for crude oil exports from the Arabian Gulf (past Hormuz) was computed.3 The average for the year was defined as 100. A significant degree of seasonal variation is evident from the data presented in Table H-1. The seasonal index of oceanborne crude oil movements from the Arabian Gulf for the 1990 to 1995 period shows a seasonal high of 102.38 in December and a low of 97.05 in April—that is, a spread of 5.3 percent. The average index for the first five-month period from April through August is 98.21 and for December through March, 101.27. An average seasonal variation of 5 percent in oil shipments is not at all surprising and does not suggest a great seasonal impact on tanker demand. However, if tanker supply is in the inelastic range, the impact of seasonality on freight rates is considerable. The seasonal variation indices for freight rates of very large crude carriers (VLCCs) trading from the Arabian Gulf to Rotterdam between 1970 and 1995 indicate a pronounced seasonal variation of considerable amplitude (Table H-2). These results support the notion expressed earlier that a small (5 percent) change in tanker shipments can result in a large (47 percent) change in freight rates, consistent with the supply inelasticities discussed in Appendix G. 1   Computations of seasonal indices were performed at the Massachusetts Institute of Technology, Department of Ocean Engineering, Ocean Systems Management, by William Gassman. 2   Data on crude oil exports were provided by PIRA, April 16, 1996. 3   Data on freight rates were compiled by Maritime Overseas Corporation based on source material from Fearnley's Oil and Tanker Markets. Quarter 4, 1995, and earlier issues.

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--> TABLE H-1 Monthly Indices of Seasonal Variations in Crude Oil Exports, 1990-1995 Month Oceanborne Crude Oil Exports from Arabian Gulf (past Hormuz) Crude Oil Exports from Arabian Gulf to Red Sea or Mediterranean Total Crude Oil Exports from Arabian Gulf Jan. 101.90 117.10 102.10 Feb. 101.20 138.53 102.20 Mar. 100.90 92.53 101.10 Apr. 97.05 94.22 97.72 May 97.87 92.83 98.66 Jun. 99.16 91.60 99.15 Jul. 99.20 92.42 100.40 Aug. 98.79 91.09 97.63 Sept. 101.40 90.83 99.92 Oct. 100.80 93.86 99.64 Nov. 100.40 102.78 99.66 Dec. 102.38 102.20 101.80 Average 100.00 100.00 100.00 In the case of Suezmax tankers (Table H-3), the same seasonal pattern is present, although somewhat moderated in that the maximum spread of indices is lower. Similar trends are observed for Aframax tankers (Table H-4). For both Suezmax and Aframax tankers, data for the period since 1990 are insufficient to permit conclusions to be drawn. Data for product tankers trading from the Caribbean to the east coast of the United States are given in Table H-5. Despite the fact that such tankers are smaller and operate in totally different trades from the VLCCs, Suezmax tankers, and Aframax tankers discussed earlier, the impact of the seasonal pattern on freight rates is very strong. TABLE H-2 Quarterly Indices of Seasonal Variations in Freight Rates of VLCCs Trading from Rotterdam, 1970-1995     Quarter Period Number of Years I II III IV Average for Year Maximum Spread between High and Low Indices 1970-1995 26 82.99 85.28 116.06 115.67 100.00 33.07 1970-1989 20 72.05 82.64 121.19 124.12 100.00 52.07 1990-1995 6 90.81 72.67 119.67 116.85 100.00 47.00

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--> TABLE H-3 Quarterly Indices of Seasonal Variations in Freight Rates of Suezmax Tankers Trading from the Arabian Gulf to Rotterdam, 1976-1995     Quarter Period Number of Years I II III IV Average for Year Maximum Spread between High and Low Indices 1976-1994 19 92.54 96.07 103.81 107.58 100.00 15.04 1976-1989 14 77.02 95.70 109.35 117.93 100.00 40.91 1992-1994 3 103.26 91.71 95.11 109.92 100.00 18.21 TABLE H-4 Quarterly Indices of Seasonal Variations in Freight Rates of Aframax Tankers Trading from North Africa to Rotterdam, 1976-1995     Quarter Period Number of Years I II III IV Average for Year Maximum Spread between High and Low Indices 1976-1995 20 95.63 94.86 94.93 114.59 100.00 19.73 1976-1989 14 85.98 91.05 98.18 124.79 100.00 38.81 1992-1995 4 98.46 99.23 94.24 108.07 100.00 13.83 TABLE H-5 Quarterly Indices of Seasonal Variations in Freight Rates of Product Tankers Trading from the Caribbean to the U.S. East Coast, 1976-1995     Quarter Period Number of Years I II III IV Average for Year Maximum Spread between High and Low Indices 1976-1995 20 113.27 84.72 86.60 115.60 100.00 30.88 1976-1989 14 108.08 84.84 90.37 116.71 100.00 31.87 1992-1995 4 118.18 95.13 87.08 99.62 100.00 31.10