SAVIOUR? Oil news has and faltering. government. Its. country s only. the. Security also. pipeline, used

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1 IRAQ TANKERS SAVIOUR? 2 nd November 2012 Oil news has been dominated recently by the US and European Union oill embargo against Iran. With the tanker market already suffering from the effects of tonnage oversupply and faltering world consumption reduced oil exports from a major producer just rubs salt in the wound for shipowner. Or does it? The sanctions against Iran led oill production to fall to 2.63 million b/d in September, their lowest level since With the latest sanctions being extended to limit Iran s ability to secure insured tonnage, Iran has been forced to move oil to its customers onn Iranian-owned vessels. This was not good news for VLCC and Suezmax owners for whom carrying Iranian oil was common place prior to sanctions. However, in sharp contrastt Iraqi oil production rose to 3.12 million b/d in September, also their highest level in a very long time. Through its Kirkuk and Basrah crude exports, Iraq is now OPEC s second largest producer after Saudi Arabia. Production levels been increasing rapidly over the last two years and Iraq has huge potential to keep expanding. The IEA forecasts that by 2020, Iraq will double its oil production to 6 million b/d and predicts a further stretch in production to 8 million b/ /d by If achieved, such results would catapult Iraq ahead of Russia in the table of all oil producers, secondd only to Saudi Arabia. The Iraqi government own predictions far exceed the IEA s forecasts. But as with all things in life, great rewards take great patience. Iraq s planned growth is plagued with logistical obstacles. Its southern export facilities at Basra and Khor al-amaya are being expanded, with two o new SPMs already in operation. Improvements to Umm Qasr, the country s only deepwater portt needed to facilitate the imports for Iraq s dramatic expansion, are underway but hampered by its need to continue dayy to day operations. Security also remains a real issue. The northern oil export route, the Kirkuk-Ceyhan sabotage attacks - disrupting export programmes and causing uncertainty over the value of o the crude on the international oil market. However, despite the t infrastructure concerns, the real potential for Iraqi crude is pipeline, used to export Kirkuk crude from Kurdistan to Turkey, continues to suffer obvious as long as the investment continues. With 50% of Iraq s currentt exports heading East, and the prediction that China will account for even larger volumes going forward, Iraqi crude volumes continuing to expand is good news for shipowners. So, Iraq is helping to make the oil production element of the tanker t equation more positive - if only we could sort out how to manage thee oversupply of tonnage!

2 CRUDE Middle East A return to normality of sorts on the VLCC s in the Arabian Gulf after last week's holidays/disruptions, but thiss has done nothing to help Owners and rates remain r pinned at around 265 x WS 35 East and 280 x WSS 22 West with a change looking pretty unlikely for the t foreseeable. Suezmaxes show little sign of changing their tune either as the scenery continues to be dominated by voyagess into India or to the West and both these routes don t seem to be moving from their comfort zone. So 140 x WS 40 for West and 130 x WS 70 for East remains typical. Aframaxes n t recovered from Eid Al-Adha as enquiry remains at a minimum and what little that does appear remains localised therefore keeping tonne miless down andd the market with it so AG/East won t move from 80 x WS 95 for AG/ East. West Africa Any hope that Owners had for a resurgence afterr last week's force majeure in Nigeria were left sorely disappointed this week as enquiry remained at a drip- in feed largely done to the logistical disruption of Sandy the States. With their return, we might see some pick up on the enquiry front but Owners won t hold their breath as everyone seems to be settling for the conference rate of 130 x WS 60 for USG and WS 62.5 for USAC/UKCM. VLCC s remain thin on western positions so any enquiry heading East will be supported by the ballasters from the East,, and with that market looking to be settling att bottom feeding levels, they will be happy to accommodate anyonee that rears their head at around 260 x WS 39.5 for east and US$3m for West Coast India. Mediterranean The Bosphorus was closed for three days but you wouldn t guessed it if you had been following the market as rates remained rooted to around 140 x WS 60 for UKC Med discharge for suezmaxes from the Blackk Sea. Aframaxes continued this week as they ended the last - in demand. Steady prompt enquiry coupled with forward fixing onn the part of some, allowed Owners to consolidate recent gains. Indeed, some Owners in tighter positions even managed to achieve a feww points more, with Black Sea loaders commanding the best rates. At present Libya cargoes should pay WS 85 for Mediterranean discharge and Black Sea cargos c nearer the WS 90 mark. Availability has thinned sufficiently, so that even a short period of quiet should nott affect rates negatively and Owners will hope that they h seen the back of the WS 70's as we approach the winter period. Caribbean Aframaxes were put on ice with Hurricane Sandy making her presence known and rates don t look to be shifting from 70 x WS 105 irrespectivee of the list thinning t because enquiry has followed suit and done the same. VLCC s weree picked off at US$3.6m for Singapore discharge this week and owners are looking to sharpen their pencils for next week's fight as the tonnage has thinned here, but they need the enquiry in order to flex their muscles. North Sea _ For the previous three months ratess on aframaxes especially in the North Sea and Baltic been suppressed. Earnings on a TCE dropped to as low as US$500 - US$1,000 per day round trip. Finally for owners this week a bottlenecking off and around early second decade laycan s saw levels move up. Primorsk / Uk Cont shifted up five points p from WS 57.5 on 100kt to WS 62.5 (with fuel oil commanding a 2.5 point premium on top of that). Now moving into the weekend with Charterers holding off Owners seem to smell blood and sentimen will remain strong into early next t week. This said with levels still low, many Owners are still much keener to continue to book the conference rate of f WS 85 on 80kt for X North Sea and avoid the longer ballast upto to Primorsk. A few questionss posed on the arbitrage this week with levels now likelyy to be around US$3.7m for Singapore discharge as the availability remains scarce and charterers need to be diligent in order to secure what little theree is around.

3 CLEAN PRODUCTS The East remains flat whilstt in the West things are starting to slide. East A busy week on the bigger ships in the Middle East with rates rising upwards again. 55 x WS 140 was confirmed for AG/Japan. That s a mighty 111 point rise on the week. Going west is worth US$2.375m ex AG, and US$2.325m ex WC India. Tonnages remains tight,, but some of the East only ships been discounting the WS 140 level, so market is probably somewhere in the WS 130 s. Owners are keen to lock in a long voyage at the top of the market and as such we topped out for now. LR2 s had an active week and a big clear out of ships. Feww ships now remain for November dates. Rates however, been trickier to get moving. Last done is 75 x WS 110 and next should be more, maybe WS 115, but It s far from a forgone conclusion. Some of the East-only Far East controlled ships might repeat last done. Going West is however, firmer. AG/UK Cont is worth at least US$2.75m and some Owners been asking for US$2.9m. The MRs been rather subdued this weekk with rates fixing at last done levels, yet the list remains quite tight for the first decade of November. TC12 continues to fix at WS 145 and with a busy Singapore market rates are expected to remain at these levels. East Africa is assessed at WS 200 and looks like it could firm for the rest of the month. AG to the UK Cont remains quiet as the West is weak in comparison to the East and Owners do not wish to re- of positions, consequently it is being assessed at a minimum US$1.6m. On the whole the MR s are balanced and there is enough activity to keep Owners interested, if there is even a slight increase in enquiry next week, could see rates rise. The Far Eastern markets continue in much the same vein as previous weeks, tonnage is evenly spaced enabling Owners to maintain current rates and for certain load dates push freight levels up. The North Asia back haul market remains steadyy and MRs are fixing South Korea /Singapore voyages at US$500k levels; LR1 s are fixing at similar rates although Owners by enlargee tend to prefer to ballast back to the AG to take advantage of the firm AG/East-West market. The tonnage list for Singapore loadingg is still slim and Owners here are doing their best to t get wring every Worldscale point they can get out of Charterer's; Singapore / Australia runs are still fixing in the 30 x WS 200 s. LR2 back hauls been largely absent in the Far East thiss week although a gaggle of cargoes ex Ag and West Coastt India been quoted for end November lifting which will pull a lot of this tonnage out of the area. The prognosis for next week is more of the same, althoughh this said the Gasoil arbitrage for South Korea / USWC has closed this week and we will seee less vessels doing thesee longer haul voyages possibly easing the strain on tonnage lists. Mediterranean Confidence appears to been shaken in the Mediterranean market this week with rates slipping off by the weeks end. Charterers been b rejecting offers in below last done as the list is providing ann ample supplly of tonnage to put downward pressure on rate ideas. Ideas for cross-med are soft and around 30 x WS with w 30 x WS 175 failing today. Looking at the level of fresh enquiry and the length of the list, there is room for this to slide further. Equally enquiiry levels looked quiet in the Black Sea, with the market trading in line with cross-med and Owners happy to ballast in to secure cargo off forward dates. Given the continued weaknesss of the market for MRs on the continent, those that t repositioned to the Mediterranean remain happy to pursue cross-med trades, however, there has been some long-haul rates for TA around 37 x WS There also been ex Mediterranean activity with Owners reporting a few enquiries for UMS stems for East discharge with rate ideas reported around US$ 850K for ann MR into the Red Sea. UK Continent Although the Continent market has been relatively quiet this week, and still spot ships available, sentiment towards the end of the week has been better. The TC2 market has hovered around 37 x WS levels this week with some Owners opting to bide their time employing prompt tonnage on short haul movements. It has become a realistic alternative to ballastt TA to pick up TC14 trades that are now earning a premium with reports on subjects 38 x WS 145. Meanwhile things been quieter on the handy s with cross continent trading at around 30 x WS on subs at time of writing. Meanwhile the fllexi market has softened a touch also and is reporting rate ideass arranged around 22 x WS 180 levels. LR1's were talking 60x ta and West Africa (although we saw 60x107.5 fixed) and LR2's were still s busy with nap movements to the East (fixing US$ $ 2.4m cont / Japan). Caribbean The tight USG/Caribbean market has been further f confounded by the inevitable disruption and uncertaintyy on the USAC to vessel itineraries and a port faciilities post Hurricane Sandy. The backhaul market has been showing steady promise for a few weeks, however, given g recent events, the market has rocketed and some Owners ideas are considering 38 x WS 175 as an achievable yard stick going into weeks end, whilst ideas for Caribbean Sea USAC U are being arranged around 38 x WS 150 levels. Realistically rate ideas and conjecture will take a while to find parity until wee some more clarification on the back of this week s disruption.

4 DIRTY PRODUCTS Handy Throughout the week tonnage up in the North remained thin on the ground, yet despite relatively little business being concluded, rates remain firm in the WS 150 region. On a simple supply versus demand analysis, it's difficult to see levels l tailing off up to the 10th thereafter ships may just start to return back to this region, finishing f previous employments. This week's Mediterranean market hass been the one showing perhaps more noticeable effects of European bank holiday disruption. Where activity week on week has declined tonnage has once again been allowed to build, as such, Owners weree left with little choice other than appeal to a charterers pockets butt reducing freight ideas. MR As seen in the past periods of inactivity for this sector can sometimes very little effect on rates, this week proves a reminder oncee again where numbers in the high 150's fill the fixture report. This said, dark cloudss could be on the horizon where weak w surrounding markets put pressure on rates. Panamax With opinion splitt over what effects hurricane Sandy could on rates this week was always going to be one to keep an eye on. Currentlyy as the dip in levels suggests tonnage has by b far outweighed requirement, going forward, however, if there iis to be any volatility in the Caribbean; current WS 1100 numbers could just be a temporary blip.

5 Dirty Tanker Spot Market Developments - Spot Worldscale TD3 VLCC AG-Japan TD5 Suezmax WAF-U SAC TD7 Aframax N.Sea-UKC LQM Bunker Price (Fujairah 380 HSFO) Dirty Tanker Spot Market Developments - $/day tce (a) TD3 VLCC AG-Japan ,500 8,250 4,750 21,000 19,750 14,000 TD5 Suezmax WAF-U SAC ,250 13,500 8,250 17,250 15,250 14,000 TD7 Aframax N.Sea-UKC ,250 5,750 3,750 14,500 10,250 8,750 Clean Tanker Spot Market Developments - Spot Worldscale TC1 LR2 AG-Japan TC2 M R - w est U KC-USAC TC5 LR1 AG-Japan TC7 MR - east Singapore-EC Aus LQM Bunker Price (Rotterdam HSFO 380) Clean Tanker Spot Market Developments - $/day tce (a) TC1 LR2 AG-Japan ,500 19,000 13,750 TC2 M R - w est U KC-USAC ,750 5,000 8,250 10,750 9,250 8,250 TC5 LR1 AG-Japan +3,000 20,000 17,000 10,500 13,750 13,250 14,250 TC7 MR - east Singapore-EC Aus +1,000 15,750 14,750 11,000 (a) based on round voyage economics at 'market' speed (13 knots laden/12 knots ballast) AV/JCH/TP/JT/al Produced by Gibson Consultancy and Research Visit Gibson s website at for latest market information E.A. GIBSON SHIPBROKERS LTD., AUDREY HOUSE, ELY PLACE, LONDON EC1P 1HP Switchboard Telephone: (UK) (International) tanker@eagibson.co.uk TELEX: GTKR G FACSIMILE No: BIMCOM This report has been produced for general information and is not a replacement for specific advice. While the market information is believed to be reasonably accurate, it is by its nature subject to limited audits and validations. No responsibility can be accepted for any errors or any consequences arising therefrom. No part of the report may be reproduced or circulated without our prior written approval. E.A. Gibson Shipbrokers Ltd 2012