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LONDON—The cost of shipping Middle East crude to Asia,
the world’s busiest route for supertankers, may drop a
fourth straight day because of a lack of demand and an
oversupply of ships.
Tanker
rental rates have had the worst start to the month of
August since at least 1991, according to data compiled
by Bloomberg. Fleet expansion will “massively” exceed
growth in cargoes over the next two years, the
Paris-based International Energy Agency said in its July
1 Medium-Term Oil Market Report.
“There
is anticipation among owners for a further decline,”
Nikos Varvaropoulos, an official at Optima Shipbrokers
in Athens, said in an e-mailed note late Tuesday. Too
many ships are competing for cargoes and activity has
been “slow,” he said.
A global
economic slowdown is hindering crude-oil demand,
potentially cutting cargoes, the Organization of
Petroleum Exporting Countries said August 15. European
and US oil companies usually import fewer cargoes in the
third quarter as they perform routine annual maintenance
and reconfigure their refineries to produce more winter
fuels.
The cost
of shipping of Saudi Arabian oil to Japan on very large
crude carriers, or VLCCs, the industry benchmark, fell
2.3 percent to 83.28 Worldscale points on Monday, its
third-straight drop, according to data from the
London-based Baltic Exchange.
Worldscale points are a percentage of a nominal rate, or
flat rate, for more than 320,000 specific routes. Flat
rates for every voyage, quoted in US dollars a ton, are
revised annually by the Worldscale Association in London
to reflect changing fuel costs, port tariffs and
exchange rates.
Each
flat-rate assessment gives owners and oil companies a
starting point for negotiating hire rates without having
to calculate the value of each deal from scratch.
Rental
income globally from leasing VLCCs declined 29 percent
over the past three trading sessions to $23,999 a day,
according to data from the London-based Baltic Exchange.
Frontline Ltd., the largest VLCC owner, said May 22 it
needs $31,500 a day to break even on the ships.
Frontline Ltd., the world’s biggest VLCC operator, said
February 15 it needs $31,400 a day to break even on each
of its supertankers.
Still,
the decline in rates may be curtailed by slower VLCC
sailing speeds, Varvaropoulos said. The average VLCC is
sailing at 9.75 knots, according to AISLive
ship-tracking data compiled by Bloomberg in London.
That’s 3.2 percent slower than August 17 and 7.3 percent
slower than July 12.
The last
time owners slowed the fleet, in the final months of
2007, it cut supply by a tenth and helped the market to
its biggest two-month rally for at least 16 years in
November and December, according to a May 2 regulatory
filing by Frontline.
Bookings for VLCCs sailing from the Middle East to Asia
account for 47 percent of global demand for the
carriers, according to New York-based McQuilling
Brokerage Partners LLP. Shipments to the US and
Caribbean, the second-biggest market, account for 14
percent of demand for supertankers. Bloomberg |
