Persian Gulf Oil-Tanker Rates May Curb Gains as Demand Slows

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

29 Nov 2007

The cost of shipping Middle East crude to Asia, which more than doubled in 11 trading days, may be constrained because refineries have already hired most of the ships they need for December. Refineries hired 82 ships to load in December, leaving about 30 to 40 outstanding cargoes, according to a report today from Paris-based broker Barry Rogliano Salles. Fifty-five available very large crude carriers, or VLCCs, can reach the region's ports by Dec. 27, according to the shipbroker. ''Activity might be tapering off,'' Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said in an e-mailed note today. Sentiment among owners is ''still strong'' and ``further increases should be possible,'' he said. GS Caltex Corp., South Korea's second-largest refiner, hired the tanker Astro Libra at a rate of 135 Worldscale points, according to a Barry Rogliano. The rate is 0.5 percent below the London-based Baltic Exchange's benchmark assessment of 135.66 points for voyages to Asia. Astro Libra probably cost less to hire than the benchmark because it's fitted with one steel hull separating its cargo from the ocean. The Baltic Exchange also considers two-hulled tankers that cut the risk of an oil spill and usually cost more to hire. 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 U.S. 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. Double-Hulled Ships At 135.66 Worldscale points, owners double-hulled VLCCs can earn about $100,389 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices. Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $30,000 a day to break even on each of its supertankers. 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 U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.