Factors related to the oil market itself have not favored correction of this trend: wide variations in crude oil prices, weakness of trading margins.

In general, despite the good half-year results recorded by the oil companies, doubt prevailed. The lack of visibility led protagonists to favour short-term operations and made them prudent in their approach to the future, at the same time as the consolidation movements observed showed that the cards were being redealt.

• Tonnage demand stagnated

The higher-capacity ships (LR1 and LR2) benefited from a relatively stable market, particularly for the LR2s whose main MEG/Far-East route practically avoided the effects of the Asian crisis. The LR1s, more severely affected, often encroached on the market of smaller ships, particularly in the Atlantic.

Ships of 40,000-45,000 dwt suffered greatly from the crisis of confidence in the market. The number of ships available, the competition from larger ships and the weakness of the chemicals market are sufficient explanation for the drop in freight rates observed in 1998.

Although the application of the ISM code does not seem to have had a significant effect, it is clear that the preference of charterers to work with quality shipowners and equipment became more pronounced through the year. Moreover, a degree of reluctance by port authorities with respect to non-SBT ships could be observed.

• The tonnage supply continued to increase

Modernization of the refined product carrier fleet continued and the average size continued to increase: out of a total of more than 1,100 ships, totaling more than 45 million dwt, ships of 40,000 dwt and more now represent more than 56%, and more than 82% of these ships are less than five years old.

A negligible number of ships were retired from the fleet, while more than 25 ships, totaling around 1,100,000 dwt, were delivered.

Many ships built to work in emerging markets (MTBE or methanol, or even pure chemical carriers) were employed to carry refined products. This phenomenon, together with the large number of ships due for delivery in 1999 and the growth in average size, is likely to result in a fall in average yields if, as most observers think, demand continues to stagnate.

The recovery in rates observed from mid-October must not hide the mediocrity of the average yields observed in 1998 (about 10% below those of the previous year). Nevertheless, the most pessimistic forecasts were not confirmed: the market recovered slightly after reaching a low point between December 1997 and February 1998.

• Middle/Far East

LR and MR were not able to maintain the levels reached at the end of 1997.

The LR1 (greater than 50,000 dwt) rates reached $14,500/day in the middle of the year, then recovered slightly before exceeding $15,000/day at the beginning of November and continuing a steady increase to reach $18,000/day at the end of the year.

The LR2 (greater than 70,000 dwt) market showed greater stability, reflecting the particular interest of charterers in the region for this type of ship and the existence of commercial agreements between shipowners.

The Far East and the Indian market remained the favorite zones for the 40,000-45,000 dwt ships, which managed to obtain acceptable yields ($13,000-13,500/day).

• Atlantic

The weak American demand meant that rates rarely exceeded $10,000/day for Europe / USA voyages. There were very few inter-zone voyages (Europe or USA / Far East).

Strong competition from larger ships (55,000 dwt or more) was experienced for gas oil cargoes (ex-Ventspils in particular).

• Period charters

The period charter market showed low activity, reflecting the reluctance of the charterers and their ability to cover their needs on the spot market. Nevertheless, at the end of the year the oil companies renewed a large part of their time charters, profiting from favorable terms: a 10-12% reduction ($13,500/day for a modern 45,000 dwt vessel).

It is hard to be very optimistic for 1999: the balance between tonnage supply and demand could be difficult to maintain given the prospects for stagnation of demand.

However, the increased stringency of the technical requirements disqualifies a significant part of the oldest tonnage on a day-to-day basis. A small increase in demand would be enough to stabilize the market at present levels.

We feel that 1999 will be a year fairly similar to 1998, marked by yields that are mediocre without being catastrophic.

Most of the activity thus concerned ships built between 1975 and 1985 (20 ships). Note that a significant part of the ships built in the 1980s were bought by American investors. This was the case for the sister ships "Clipperventure L", "Conquestventure L", "Courageventure L" and "Crystalventure L", 31,700 dwt, built in 1980 and 1981, sold as a block for a total price of around $42,000,000 with five to six years of bare-boat back charter. For buyers of the same nationality, examples include the sale in May of the M/T "Brali", 48,581 dwt, built in 1985, for $17,000,000. The oldest ships found buyers among operators in the Mediterranean market, mainly in Italy and Greece, and the following sales were noted: the M/T "Enalios Avra", 37,561 dwt, for $3,800,000 and the M/T "Sea Champion", 36,572 dwt, built in 1973, for $2,500,000.