Bloomberg News

Supertankers Have ‘Poor’ Outlook on Oversupply, Braemer Says

September 02, 2011

(Updates with broker comment in third paragraph.)

Sept. 2 (Bloomberg) -- Lower prices for supertankers, which haul about a fifth of the world’s oil, signal a “poor” earnings outlook for the fleet for as long as five years, shipbroker Braemar Shipping Services Plc said.

Earnings from hiring out the vessels fail to cover owners’ operating expenses because too many new ships entered service, creating an oversupply that depressed rents, London-based Braemar said in a weekly report yesterday.

Costs to hire a 2-million barrel tanker, also known as a very large crude carrier, to ship crude to Asia from the Middle East averaged about $2,200 a day this week, according to Braemar. That compares with crewing and operating costs of $10,000 to $12,000 a day, Tim Ogden, director of tankers at the Braemar Seascope Ltd. unit, said by phone from London.

Owners are contending with a fleet that’s the largest in 29 years and growing at the fastest pace in more than three decades, forcing freight rates to a 14-year low. The vessels will earn about $15,600 a day over the next two years, 40 percent of the level secondhand vessels need to break even, Oslo-based investment bank RS Platou Markets AS said Aug. 19.

“We have a fleet that’s completely saturated,” Braemar’s Ogden said. Demand for the supertanker fleet isn’t falling, he said. About 110 to 120 supertankers were booked each month on the spot market on average this year for loading at ports within the Middle East Gulf, the largest exporting region, he said.

The value of a five-year-old supertanker fell 12 percent in 2011 to $75 million, to the lowest level since 2004, according to the Baltic Exchange, a London-based provider of shipping freight costs. The value peaked at $162 million in July 2008.

--Editors: Dan Weeks, Sharon Lindores.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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