Bloomberg News

Oil-Tanker Rents Slide for Seventh Session as Crude Demand Slows

February 03, 2012

Feb. 2 (Bloomberg) -- Charter rates for the biggest tankers hauling Middle East oil to Asia fell for a seventh session, the longest streak since September, on weaker demand for crude and a surplus of available vessels.

Hire costs for very large crude carriers, each able to hold 2 million barrels, on the benchmark Saudi Arabia-to-Japan voyage slid 2 percent to 49.18 industry-standard Worldscale points today, according to the London-based Baltic Exchange.

Stronger oil buying boosted VLCC rates before Chinese markets closed last week for the Lunar New Year holiday. Demand has since failed to recover, according to Oslo-based investment bank RS Platou Markets AS. Charter rates have dropped 25 percent since Jan. 20, this year’s high and the last session before the Chinese holiday, and have lost 16 percent this week.

“Earnings are down about 30 percent from the peak, as post-Chinese holiday activity has been unable to provide support for ship owners,” Platou said in an e-mailed report.

Daily income for VLCCs on the benchmark route decreased for a ninth session, sliding 12 percent to $8,118, according to the exchange. Returns have plunged 75 percent from Jan. 20 to the lowest level since Nov. 9, its figures show.

The exchange’s assessments don’t reflect speed changes aimed at reducing fuel costs, vessel owners’ main expense. Owners can curb those expenses, boosting returns, by slowing ships on return journeys after unloading of cargoes.

The price of ship fuel, or bunkers, decreased 0.1 percent to $698.50 a metric ton, the third straight decline, data compiled by Bloomberg from 25 ports worldwide showed.

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 broader measure of oil- shipping costs that includes vessels smaller than VLCCs, decreased 0.2 percent to 801.

--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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