Persian Gulf Tanker Rates May Extend Gain on Double-Hull Dearth

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

29 Feb 2008

The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may climb for a fifth day as the supply of ships that oil companies prefer to hire declines. There are 35 very large crude carriers, or VLCCs, fitted with double hulls that are available for hire within the next 30 days, according to a report today from Paris-based shipbroker Barry Rogliano Salles. A month ago there were 54 such vessels. Tankers fitted with a double hull cut the risk of an oil spill.``There's no downside in the short term as I can see, morale is still very high out there,'' Halvor Ellefsen, an Oslo-based tanker broker at SeaLeague AS, said in an e-mailed note today. ``However, there's enough tonnage so I do not foresee a tremendous hike either.''Zhuhai Zhenrong Co., a state-backed Chinese oil company, hired the double-hull VLCC Eagle Venice for 134 Worldscale points. That's 2.3 percent above the London-based Baltic Exchange's benchmark assessment of 130.94 points for voyages to Asia.Tankers fitted with a double hull make up about 87 percent of the ships that comprise the London-based Baltic Exchange's benchmark assessment.Exxon Mobil Corp., the world's most profitable publicly quoted company ever, has received 10 offers from tanker owners to ship a cargo to Asia that's due to load around March 24 in the Middle East, according to Ellefsen.Booking LevelsNormally, that number of offers would trigger competition among owners and cause hire rates to drop. Exxon is unlikely to beat previous booking levels because of a ``continuous flow of cargoes,'' Ellefsen said.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.At 130.94 Worldscale points, owners of VLCCs can earn about $98,915 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 Feb. 15 it needs $31,400 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.