Bloomberg News

Oil-Tanker Earnings Climb for Seventh Session as Glut Shrinks

October 24, 2011

Oct. 24 (Bloomberg) -- Returns for oil tankers hauling 2 million-barrel cargoes of crude on the industry’s benchmark route climbed for a seventh session as a glut of the vessels shrank.

Daily earnings for very large crude carriers, or VLCCs, on the Saudi Arabia-to-Japan voyage advanced 33 percent to $4,866, according to the London-based Baltic Exchange. That’s the highest level since June 29, according to the exchange, which calculates income without adjusting for potential speed cuts to save on fuel costs.

Returns “continued to inch higher on the back of healthy activity and a tighter position list,” Norwegian investment bank Pareto Securities AS wrote in an e-mail today.

Income for VLCCs on the benchmark journey turned positive Oct. 20 after almost eight weeks of negative returns stemming from a glut of ships that overwhelmed demand. There were 90 of the ships available to load oil in the Persian Gulf over the next 30 days as of Oct. 21, down from 103 the week before, according to Pareto.

VLCC charter rates on the route increased for a 10th session, gaining 2.6 percent to 52.24 Worldscale points, according to the exchange. That was the highest level since June 27.

Port Tariffs

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.

The price of ship fuel, or bunkers, climbed 30 percent from the start of the year to $661.54 a metric ton, data compiled by Bloomberg from 25 ports worldwide showed.

Earnings for aframax tankers, each able to haul 1 million barrels of crude, in the Mediterranean Sea slid 6.2 percent to $52,815 a day. The drop was the second in a row after returns reached a 2011 high on Oct. 20 because of delays in navigating Turkey’s Bosporus strait that curbed vessel availability.

The Baltic Dirty Tanker Index, a measure of shipping crude that includes vessels smaller than VLCCs, dropped 1.1 percent to 840, the exchange said.

--Editors: Dan Weeks, Sharon Lindores.

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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