Apart from LNG tanker rates, Christmas is not here for other kind of shipping and in particular, VLCCs which are down 7% in November. Only AFRAMAXES and SUEZMAXES are strong but at low levels still. Floating storage is down according to EURONAV and although the contango widened with the European lock downs, it is nothing like in Q2 and unlike during this period, VLCC rates did not jump above 100,000$. It is true though that these lock downs are very different. Firstly it is the beginning of winter and days are shorter so there is a higher energy demand than this spring. Secondly, the drop in traffic is not as large as Q1/Q2 as we are at 45% of normal vs 2.5% in Spring. Air traffic is low as in Q2 so is not an additional weight on energy demand. LNG rates are now above 100,000 $ a day and this is good news for LNG tankers which still look good value here.
We saw a furious rally yesterday on transport,airlines,… and oil as there is a chance of having a vaccine. May be too much enthusiasm too soon as to reach immunity, we need to give the vaccine to 66% of the world ( the rule of thumb is a function of R and given R >2 we get to this figure. With this vaccine which has to be kept at minus 70 C it is very tough to envisage a fast vaccination of 66% of the World and thus the enthusiasm on cruises and airlines is more triggered by short covering than real fundamentals.
My message is thus to stay calm and constructive. The worst of COVID is in front of us and many airlines may be bust before 10% of the population is vaccinated… On top of this, the issue of the elections in the USA is far from clear cut, at least for the Senate if we rule out Trump lunatic dream of being elected and that the Judges will agree that he is a victim of fraud.
