Bloomberg News

Crude Oil-Tanker Rents Fall as Ship Supply Exceeds Cargo Demand

December 16, 2011

Dec. 15 (Bloomberg) -- Returns for the largest oil tankers hauling 2 million-barrel crude shipments on the industry’s benchmark route fell for a third day, to the lowest level in a month, as the supply of vessels exceeded cargo demand.

Daily income for very large crude carriers, or VLCCs, on the Saudi Arabia-to-Japan voyage declined 2.4 percent to $11,810, the lowest price since Nov. 11, according to the London-based Baltic Exchange. Costs measured in industry- standard Worldscale points fell 0.1 percent to 56.81.

Global demand to ship crude on VLCCs will rise 5.3 percent to 148.2 million deadweight tons this year, according to Clarkson Research Services Ltd., a unit of the top global shipbroker. Fleet growth will exceed demand, expanding 8 percent to 172.9 million tons, its figures show.

“Oversupply will keep a clammy hand over the market,” Erik Nikolai Stavseth, an analyst at Oslo-based Arctic Securities ASA, said by e-mail. There are 81 of the ships available for loading in the Persian Gulf over the next four weeks, three more than yesterday, according to a e-mailed report from broker Marex Spectron Group Ltd.

Ship fuel, an owner’s single-biggest expense, slid 0.1 percent to $651.53 a metric ton, data compiled by Bloomberg from 25 ports worldwide showed. It’s still up 28 percent this year. Owners can boost returns by reducing a ship’s speed on a return journey after unloading a cargo, saving on fuel costs. The exchange’s earnings estimates don’t reflect speed cuts.

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 Baltic Dirty Tanker Index, a measure of shipping crude that includes vessels smaller than VLCCs, fell 0.3 percent to 856 points, the exchange said.

--Editors: John Deane, Claudia Carpenter

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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