Tanker Freight Research Articles

Cost of carry, causality and arbitrage between oil futures and tanker freight markets

Abstract This paper investigates the dynamic relationship between oil futures and spot markets and tanker freight rates across two major tanker routes. In particular, we examine the validity of the cost of carry relationship in the WTI futures market, which suggests that the difference between physical and futures crude oil prices should reflect the transportation costs. We also examine whether the futures-physical oil differential contains information regarding tanker freight rate formation. Using physical crude oil prices for the Brent and Bonny markets, WTI futures prices and freight rates we find no evidence to support the existence of a relationship between tanker freight rates and physical-futures differentials in the crude oil market. This is mainly attributed to regional supply and demand imbalances and suggests that arbitrage opportunities between oil derivatives and tanker freight markets exist. Simulated trading strategies reveal the existence of excess profits, which are robust to variations in transaction costs, pipeline charges and timing of initiation of arbitrage.

Time Varying Risks Among Segments of the Tanker Freight Markets

The aim of this paper is to investigate the relative risks involved in owning and operating tanker vessels of different sizes in world spot and time-charter (TC) markets. Cointegrating Error Correction ARCH models are used to model spot and TC rates for each ship size and the associated time varying risks involved. The advantage of using this class of models for analysis is that the error correction term can capture the short-run dynamic behaviour of rates, while the estimation of time varying volatilities allows for the explicit comparison of risks at each point in time. Indeed, levels and patterns of freight risk are shown to vary over time. Broadly, comparison of these risks across markets point to TC rates having lower volatilities in comparison to the spot rates, and freight rates of larger vessels having higher volatilities compared to the freight volatilities of smaller vessels. Thus, for risk averse owners, wishing to reduce risks, results suggest operating tanker ships in TC rather than spot markets, and using smaller size vessels to diversify the higher risks involved in owning and operating larger size vessels.

Tanker forward freight agreements: the future for freight futures?

Since paper freight-hedging tools were introduced to counter volatile tanker freight rates, the hesitant uptake of tanker Forward Freight Agreements (FFAs) has been attributed to traditional risk seeking propensities amongst tanker owners, naturally reluctant to hedge against risk. To test how far the well-documented generic determinants and incentives for corporate hedging could explain this hesitation in the tanker market, the attitudes of tanker owners and charterers towards freight hedging, risk and perceptions of FFAs, were surveyed. Although FFAs were widely viewed as an important development, some respondents were unaware of their function and a majority had not used them. The link between freight hedging activity and participants' risk aversion was not clear-cut, but with market liquidity critical to raising FFA usage improved technical education is essential to widespread acceptance

Seasonality patterns in tanker spot freight rate markets

The aim of this paper is to investigate the existence and nature of seasonality (deterministic or stochastic) in tanker freight markets and measure and compare it across sub-sectors and under different market conditions (expansionary and contractionary) for the period January 1978 to December 1996. The existence of stochastic seasonality is rejected for all freight series while results on deterministic seasonality indicate increases in rates in November and December and decreases in rates from January to April. Seasonality is found to be varying across markets depending on vessel size and market condition. Seasonality comparisons under different market conditions, an issue investigated for the first time in the econometrics literature using Markov Switching models, reveal that seasonal rate movements are more pronounced when the market is recovering compared to smaller changes when the market is falling. This is well in line with the low and high elasticity of supply expected in expansionary and contractionary periods of shipping markets. The results have implications for tactical shipping operations such as budget planning, timing of dry-docking, vessel speed adjustments and repositioning. As expected, the out-of-sample forecasting performance of these Markov Regime Switching models is lacking somewhat, a result which is thought to be a consequence of having to predict ‘states’ simultaneously with mean values.

Is there potential for a two-tier tanker market?

The simulations performed show that demand for quality tankers has to increase by 30% for a two-tier tanker market to emerge. The two-tier freight structure will only last for 3–5 years due to contracting induced by higher freight rates. This means that OPA does not by itself result in higher freight rates for tankers that comply with the requirements. If Western Europe also closes their trades to substandard tankers, a two-tier market emerges and quality tankers obtain a premium. The paper presents a simulation model for international tanker markets. The non-linear complementary equilibrium model solves for a sequence of static equilibria in segmented tanker freight markets, shipbuilding and scrapping markets. Freight markets are segmented according to quality requirements for tankers. The model specifies three tanker classes and one—quality tankers—can operate both market segments.

Forecasting tanker freight rate using neural networks

Improvement in forecasting accuracy is a difficult task but critical for business success. This paper investigates the potential of neural networks for short- to long-term prediction of monthly tanker freight rates. Procedures are outlined for the development of the neural networks. The problem of under-training and over-training is addressed by controlling the number of iterations during the training process of neural networks. A comparative study of predictive performance between neural networks and ARMA time series models is conducted. Our evience shows that neural networks can significantly outperform time series models, especially for longer-term forecasting.

The Use of Fuzzy Logic in Shipping and Shipbuilding Market Modeling, Analysis, and Forecasting

Fuzzy logic is a technique that attempts to systematically and mathematically emulate human reasoning. This paper investigates the feasibility of applying fuzzy logic to transportation and shipbuilding market modeling, analysis and forecasting. Fuzzy systems called fuzzy decision modelers (FDMs) are developed based on fuzzy logic techniques to model the crude oil tanker freight rate market, the tanker new order market and the tanker scrapping market. Our results show that the FDMs are able to model and forecast these economic systems very well. In addition, the FDMs also provide valuable insights into market mechanisms and market participants' decision-making patterns. The FDMs are mathematical model-free, nonlinear systems capable of capturing complicated relationships among economic variables. The FDMs are easy to develop and easy to interpret. These advantages of fuzzy systems suggest that fuzzy logic techniques are a promising alternative in shipping and shipbuilding market modeling, analysis and forecasting.

Numerical Recipes in FORTRAN—The Art of Scientific Computing 2nd Ed. (W. H. Press, W. T. Vetterling, S. A. Teukolsky and B. P. Flannery)

Previous article Next article Numerical Recipes in FORTRAN—The Art of Scientific Computing 2nd Ed. (W. H. Press, W. T. Vetterling, S. A. Teukolsky and B. P. Flannery)Elizabeth Greenwell YanikElizabeth Greenwell Yanikhttps://doi.org/10.1137/1036047PDFBibTexSections ToolsAdd to favoritesExport CitationTrack CitationsEmail SectionsAbout"Numerical Recipes in FORTRAN—The Art of Scientific Computing 2nd Ed. (W. H. Press, W. T. Vetterling, S. A. Teukolsky and B. P. Flannery)." SIAM Review, 36(1), pp. 149–150 Previous article Next article FiguresRelatedReferencesCited byDetails Electro-optical and charge transport properties of chalcone derivatives using a dual approach from molecule to material level simulationsComputational and Theoretical Chemistry, Vol. 1203 Cross Ref A computational approach to study the optoelectronic properties of F -BODIPY derivatives at the bulk level for photovoltaic applications10 January 2020 | Materials Research Express, Vol. 6, No. 12 Cross Ref Arresting an Unusual Amide Tautomer Using Divalent Cations18 September 2019 | The Journal of Physical Chemistry B, Vol. 123, No. 40 Cross Ref CW EPR and DEER Methods to Determine BCL-2 Family Protein Structure and Interactions: Application of Site-Directed Spin Labeling to BAK Apoptotic Pores8 December 2018 Cross Ref Computational study of structural, optoelectronic and nonlinear optical properties of dynamic solid-state chalcone derivativesJournal of Molecular Graphics and Modelling, Vol. 75 Cross Ref Multifractal cross-correlations between crude oil and tanker freight ratePhysica A: Statistical Mechanics and its Applications, Vol. 474 Cross Ref Volume 36, Issue 1| 1994SIAM Review History Published online:17 February 2012 InformationCopyright © 1994 © Society for Industrial and Applied MathematicsPDF Download Article & Publication DataArticle DOI:10.1137/1036047Article page range:pp. 149-150ISSN (print):0036-1445ISSN (online):1095-7200Publisher:Society for Industrial and Applied Mathematics

The Level and Structure of Single Voyage Freight Rates in the Short Run

The oil-tanker markets have been for years a puzzle to economists and practitioners alike. Tinberger (1934), Koopmans (Koopmans, T. 1936. Tanker Freight Rates and Tankship Building. Haarlem, Netherlands.) and Zannetos (Zannetos, Z. S. 1966. The Theory of Oil Tankship Rates: An Economic Analysis of Tankship Operations. M.I.T. Press, Cambridge, Mass.) observed a cyclicality in the level of tanker rates and “feast or famine” patterns which cannot be fully explained by a cyclical demand. Zannetos (Zannetos, Z. S. 1966. The Theory of Oil Tankship Rates: An Economic Analysis of Tankship Operations. M.I.T. Press, Cambridge, Mass.) provided evidence linking these phenomena to price-elastic expectations by those who operate in the tanker markets and to the concomitant lumpiness in investment in new tankers. With the advent of the supertankers, especially the very large crude carrier (VLCC) and the ultra large crude carrier (ULCC), another paradox has been added, that of a structure of spot rates. The purpose of this paper is to shed some light on this last issue. A statistical model is constructed describing spot freight rates in terms of the operating costs of the marginal ship, the size of the various vessels relative to the marginal ship, the proportion of the tanker fleet operating in the spot market and the proportion of the fleet which is laid up for more than 2 months. The model developed is validated by using the empirical data of the entire period from September 1971 to December 1976, and also the stratified data of shorter periods characterized by either abnormally high or abnormally low rates. Based on these results, a measure of the economies of scale for tankers for different sizes is developed, and the proportion of these economies which is enjoyed by the shipowner, under various market conditions is calculated.

Tanker freight rates in the short and long run

Tanker freight rates in the short and long run

A TIME SERIES ANALYSIS OF POST-WAR FLUCTUATIONS IN SHIPPING FREIGHTS

When we discuss the business cycle in ocean shipping, the indicators we most commonly employ are the Index of Tramp Shipping Freights, and Index of Tramp Time Charter Rates or Index of Tanker Freight Rates, which are published monthly by the Chamber of Shipping of the United Kingdom or the Norwegian Shipping News. But people usually use these indices without sufficient knowledge about the nature of these economic indicators, namely as to what sort of movement these freight indices inherently trace. More concretely, no sufficient analysis has ever been made as to what extent these indices follow seasonal fluctuations, or whether there is any trend in the movement of these indices, or how are the period and amplitude of cycle, or whether it is susceptible to irregular factors etc. ; nor has hardly any study been made of the interrelation among these various freight indices, except the analysis of Lewis2), which treated the interrelation between voyage charter rates and time charter rates.

Tanker Freight Rates and Tankship Building.

Tanker Freight Rates and Tankship Building.

Tanker Freight Rates and Tankship Building: An Analysis of Cyclical Fluctuations. T. Koopmans

<i>Tanker Freight Rates and Tankship Building: An Analysis of Cyclical Fluctuations</i>. T. Koopmans

Tanker Freight Rates and Tankship Building: An Analysis of Cyclical Fluctuations.

Tanker Freight Rates and Tankship Building: An Analysis of Cyclical Fluctuations.

Tanker Freight Rates and Tankship Building.

Tanker Freight Rates and Tankship Building.

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