Recent developments in the crude tanker market, such as the delay in the IMO Ballast Water Management Convention and the OPEC meeting on Monday, are expected to add downwards pressure to the ailing sector.

The OPEC meeting at St Petersburg on Monday, Saudi Arabia declared that they would cap crude oil exports at 6.6 mm/d in August, marking a six-year low, Ocean Freight Exchange (OFE) said citing JODI data.

The effect of the drop in exports is already being felt in the VLCC market as charterers start covering the August program, with meagre fixing activity seen so far. Charterers seem to be withholding cargoes in an attempt to further pressure rates downwards, which have been languishing around w50 for an AG/Japan voyage, OFE said.

While Nigeria was previously exempt from the production cuts, they voluntarily agreed to limit or even cut their output from 1.8 mmb/d.

The market is currently facing a perfect storm of tonnage overcapacity, low demolitions, OPEC oil output cuts as well as seasonal summer lull in demand.

As reported by Reuters, Nigeria’s crude production has been averaging 1.7 mmb/d recently. While the bulk of Nigerian crude exports are loaded on Suezmaxes and VLCCs, the production cap “may not have much impact on the tanker market as volumes often fluctuate due to unplanned outages.”

“Assuming the Saudis continue their strategy of cutting medium/heavy crude production, refiners in Asia are expected to continue importing crudes of similar grades from the US and Latin America to meet demand,” OFE said.