Bloomberg News

Oil-Tanker Glut Shrinks to Four-Month Low as Demand Rises

October 25, 2011

(Updates with today’s rates starting in sixth paragraph.)

Oct. 25 (Bloomberg) -- A surplus of the largest crude-oil carriers competing to load 2 million-barrel cargoes at Persian Gulf ports shrank to a four-month low as demand for vessels increased, a survey showed.

There are 10 percent more very large crude carriers, or VLCCs, available for hire over the next 30 days than there are likely cargoes, according to the median estimate in a Bloomberg News survey of four shipbrokers and two owners today. That’s the smallest excess since June 21 and down from the week-ago surplus of 18 percent, the data show.

“Refineries in Asia are coming out of a period of maintenance,” Thomas Zwick, an analyst at Oslo-based shipping consultant Lorentzen & Stemoco AS, said by phone today. “This is increasing the number of ships required for crude-oil cargoes.”

Oil companies booked 55 vessels to collect cargoes from Middle East ports last week, up from 43 in the prior seven-day period, according to a weekly report from Norwegian investment bank Pareto Securities AS e-mailed late yesterday. That was 77 percent above the five-year average, the report showed.

“Sentiment remains quite firm for now,” Pareto wrote in an e-mail today, citing “decent activity in the Persian Gulf yesterday.”

Eighth Increase

Returns for VLCCs on the industry’s benchmark Saudi Arabia- to-Japan route climbed today for an eighth session, jumping 46 percent to $7,097 a day, according to the London-based Baltic Exchange. Income from the voyage turned positive Oct. 20 after almost eight weeks of negative returns stemming from a glut of ships.

The bourse’s assessments make no allowances for speed cuts on return journeys after unloading that may increase rental income by curbing fuel use. The price of ship fuel, or bunkers, is up 31 percent from the start of the year to $667.28 a metric ton, according to data compiled by Bloomberg from 25 ports worldwide.

VLCC charter rates on the benchmark route increased for an 11th session, gaining 4.2 percent to 54.44 Worldscale points, according to the exchange. That’s the highest rate since June 24. The 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 Baltic Dirty Tanker Index, an overall measure of shipping crude that includes vessels smaller than VLCCs, declined 2.7 percent to 817, the exchange said. The drop was the biggest since March 23.

--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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