Bloomberg News

Oil-Tanker Returns Fall for Third Day as Supply Exceeds Demand

May 11, 2012

Returns for the largest oil tankers hauling 2 million-barrel cargoes of Persian Gulf crude to Asia fell for a third session as a glut of available ships overwhelmed demand for cargoes.

Income for very large crude carriers on the benchmark Saudi Arabia-to-Japan route slid 3.6 percent to $23,853 a day, according to the Baltic Exchange in London. That extended the current streak of declines to 11 percent.

There are between three and six cargoes to be loaded during May with 34 VLCCs available in the Persian Gulf, according to Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group. The VLCC fleet will expand 6.2 percent in 2012, exceeding 4.9 percent demand growth, said Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

“Rates are not going to turn around and spike up,” Sy said in an e-mailed report today.

The exchange’s assessments don’t reflect speed cuts aimed at reducing fuel costs, vessel owners’ largest expense. Owners can boost returns by slowing ships on return journeys after unloading of cargoes.

The price of ship fuel, or bunkers, added 0.8 percent to $684.79 a metric ton, ending a five-day losing streak, data compiled by Bloomberg from 25 ports worldwide show.

Charter costs for very large crude carriers on the benchmark voyage slid 1.4 percent to 56.47 industry-standard Worldscale points, an eighth successive decline, staying at the lowest level since April 24, figures from the London-based Baltic Exchange showed today.

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, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, lost 0.8 percent to 760, according to the bourse.

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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