Bloomberg News

Oil-Tanker Hire Rates Slide for Ninth Session as Demand Dwindles

February 07, 2012

Feb. 6 (Bloomberg) -- Rates to charter the largest oil tankers fell for a ninth session, extending a second weekly drop, as demand for cargoes dwindled.

Daily hire costs for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage declined 0.3 percent to 48.88 industry-standard Worldscale points, according to the Baltic Exchange in London today. Charter rates have slid 25 percent during the longest losing streak since August. Each of the ships can hold 2 million barrels of oil.

Demand to haul Middle East crude to Asia typically slows after February, according to Sverre Bjorn Svenning, an Oslo- based analyst at Fearnley Consultants AS, a unit of shipbroking group Astrup Fearnley. Stronger oil buying boosted VLCC hire rates before China’s Lunar New Year holiday closed markets in the country for a week last month.

“Winter markets start heating up from October to February, when they start calming down,” Svenning said by phone today. “This is usually a quieter period. There are typically stock draw downs worldwide during February and March.”

VLCC charter rates climbed 31 percent from the start of the year through Jan. 20, the last session before the Chinese celebrations.

The global fleet of VLCCs will expand 6.5 percent this year to 187 million deadweight tons, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. That’s more than double its estimate for 3.1 percent growth in demand to 152.4 million tons.

$8,627 a Day

Daily returns for VLCCs on the benchmark voyage gained 14 percent to $8,627, the Baltic data show. That reduced the plunge since the start of the year to 30 percent.

The exchange’s assessments don’t account for owners cutting ship speeds to reduce fuel costs, their biggest expense. The price of ship fuel, or bunkers, gained 0.1 percent to $699.36 a metric ton, according to data compiled by Bloomberg from 25 ports worldwide.

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, an overall measure of shipping crude that includes vessels smaller than VLCCs, declined 0.6 percent to 785, according to the exchange.

--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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