Persian Gulf Tanker Rates May Stem Drop as Owners Await Cargoes

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

30 Sep 2008

The cost of shipping Middle East crude to Asia, down for the first day in seven yesterday, may stem further declines as owners anticipate Chinese refineries will accelerate their demand for vessels next week. Markets in China, the world's second-largest energy consuming country, are closed for National Day holidays and won't reopen until Oct. 6. The return of Chinese traders will mean more competition for ships, said Nikos Varvaropoulos, an official at Optima Shipbrokers in Athens.
``Chinese holidays will put pressure on the market in the owners' favor because'' oil company officials will have to ``move quickly'' next week to secure tankers to load in October, Varvaropoulos said in an e-mail today.
Refineries need to hire about 30 more very large crude carriers, or VLCCs, to load in October, according to a report today from Paris-based shipbroker Barry Rogliano Salles. There are 44 available vessels that can get to the region by the end of the month.
Vitol SA, an oil-trading company, hired the tanker Front Lady for 128.75 Worldscale points, according to the Paris-based shipbroker. That's 12 percent below the London-based Baltic Exchange's benchmark rate for cargoes to Asia, which declined 1.6 percent to 146.8 points yesterday.
Front Lady is fitted with a single hull separating its cargo from the ocean. The exchange's assessment is dominated by bookings of double-hull tankers that cut the risk of an oil spill and are normally more expensive to hire.
Rental rates are on course to average 148.26 Worldscale points this quarter, more than double the 56.54-point average of the same period last year.
Fuel Costs
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.
A rate of 148.6 Worldscale equates to $94,962 in daily rental income after fuel and port costs are paid, according to the Baltic Exchange's calculations. Globally, the carriers are making $81,707 a day.
Frontline Ltd., the world's biggest operator of very large crude carriers, said Aug. 21 it needs $31,400 a day to break even on each of its supertankers.

Source: Alaric Nightingale, Bloomberg