Tanker rates poised for hike: report

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

25 Feb 2010

The world tanker market stands to benefit if an improving economy and declining oil inventories prompt the Organization of the Petroleum Exporting Countries to increase production, according to a report from Jefferies & Co. A premium of April crude-oil futures over March narrowed to 15 US cents a barrel on Monday, when the March contract expired, from 49 US cents on Feb 2. The premium, known as a contango, of the August contract over March was US$1.69 on Monday, down from US$2.70 a barrel on Feb 2.
The narrowing premiums reduce the reward for buying oil now and holding it for sale in later months.
'We expect crude-oil inventories to continue to decline as the incentive to store crude oil dissipates, ultimately requiring Opec to increase production,' analysts led by maritime group head Douglas Mavrinac said in the report, dated Monday.
An increase in Opec oil production, which would also come as the world economy improves, would boost tanker rates, according to the report. 'Although we believe the crude oil tanker market is likely to remain challenging in the near term, we believe the longer-term outlook is attractive as the improving economy is likely to cause Opec to increase production, which should stimulate crude oil tanker demand.'
In line with this, the cost of delivering Middle East crude oil to Asia, the world's busiest route for supertankers, advanced for a third day as supply of the ships dropped.
Charter rates for very large crude carriers on the benchmark Saudi Arabia-Japan route rose 4.2 per cent to 77.66 Worldscale points on Tuesday, Baltic Exchange data shows. Forecast supertanker arrivals at Persian Gulf ports have dropped 22 per cent in less than a week, according to Arctic Securities ASA.
'The number of vessels expected over the next 30 days has fallen to only 70, down from 90 on Wednesday last week, giving ship owners renewed confidence to push for higher rates,' Oslo- based analysts Martin Sommerseth Jaer and Erik Nikolai Stavseth said in a note.
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.

Source: Bloomberg