Bloomberg News

Oil-Tanker Losses Persist as Owners Contend With Vessel Surplus

August 06, 2012

Losses for oil-tanker owners hauling Middle East crude to Asia narrowed, amid an oversupply of vessels for loading in the Persian Gulf and few cargoes.

Daily losses for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage shrank to $5,780, figures from the Baltic Exchange in London showed today. VLCCs were losing $6,356 a day on Aug. 3, exchange data showed. The ships were earning $41,093 daily at this year’s high in April.

The VLCC fleet will expand 6.9 percent this year, above 4.7 percent demand growth, according to Clarkson Plc (CKN), the world’s largest shipbroker. The supply of the largest crude carriers in the gulf over the next 30 days shrank by one ship to 84, according to Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group.

“Still more than enough ships around,” Sy wrote. “With 77 ships available from now until the end of the month it’s unlikely rates will make a dramatic rally today or any day soon.”

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, slipped 0.4 percent to $621.93 a metric ton, the figures showed.

Charter costs for VLCCs on the benchmark voyage gained 0.9 percent to 34.34 industry-standard Worldscale points, exchange figures showed. Each of the tankers can hold 2 million barrels of crude.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 34.34 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, fell 0.5 percent to 623, according to the exchange. The gauge is at the lowest level since July 19.

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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