Bloomberg News

Oil-Tanker Returns Are Positive for First Time in Eight Weeks

October 20, 2011

Oct. 20 (Bloomberg) -- Returns for tankers hauling 2 million-barrel cargoes of crude oil on the industry’s benchmark route turned positive for the first time in almost eight weeks as a glut of ships shrank.

Daily rental income for very large crude carriers, or VLCCs, on the Saudi Arabia-to-Japan voyage strengthened to $1,317 from minus $215 yesterday, data from the London-based Baltic Exchange showed. It calculates returns without adjusting for potential speed cuts to save on fuel costs. Returns had been negative as of Aug. 26.

“Earnings are rising for VLCCs as the tiny bit of better sentiment from the beginning of the week manages to take hold,” Ben Goggin, a London-based freight-derivatives broker at SSY Futures Ltd., a unit of the world’s second-biggest shipbroker, said by e-mail.

Returns first turned negative on Aug. 1 as a surplus of available VLCCs in the Persian Gulf overwhelmed demand. The excess dwindled this week, spurring vessel owners to seek higher returns, said Goggin. Charter costs for VLCCs on the benchmark route increased for an eighth session today, the longest streak since February.

Hire rates increased 2.6 percent to 49.56 Worldscale points, the highest level since July 26, according to the exchange. That extended the current run of advances to 20 percent.

Fuel Prices

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.

Returns for suezmax tankers in the Mediterranean Sea advanced for a fourth day as delays navigating Turkey’s Bosporus strait continued to curb vessel availability. Daily income from the ships, each able to haul 1 million barrels of crude, advanced 0.7 percent to $58,995, according to the exchange.

Vessels must wait five days to transit the Turkish Straits, connecting the Black and Aegean seas, when heading north or two days for voyages south, shipping-information provider Gulf Agency Co. said today.

The price of ship fuel, or bunkers, climbed 30 percent from the start of the year to $659.02 a metric ton, data compiled by Bloomberg from 25 ports worldwide showed.

The Baltic Dirty Tanker Index, a measure of shipping crude that includes vessels smaller than VLCCs, increased 1.5 percent to 856, the exchange said.

--Editors: Dan Weeks, John Deane

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

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


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