Bloomberg News

Gulf Oil-Tanker Glut Is Seen Expanding on Fewer Bookings

August 07, 2012

The surplus of the largest oil tankers available to load cargoes in the Persian Gulf expanded as the number of vessels booked to haul crude to Asia declined, a Bloomberg News survey showed.

There are 16.5 percent more very large crude carriers for hire in the gulf for the next 30 days than there are probable cargoes, the median estimate in a survey of six shipbrokers and owners showed today. That’s a 1.5 percentage-point gain from last week.

There has been an 8.8 percent decrease in the number of VLCCs sailing East from the Persian Gulf during June and July compared with the same period last year, according to Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo. 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 decline in activity has (unsurprisingly) had a negative impact on freight rates and VLs are still struggling in negative territory,” Stavseth wrote in the report.

VLCCs able to haul 2 million barrels of oil on the benchmark to Saudi Arabia-to-Japan voyage are losing $4,383 daily, according to figures from the London-based Baltic Exchange, a publisher of freight rates. That compares with a daily loss of $5,780 yesterday, the data show. July’s average return of minus $3,209.55 was the worst on record for figures going back to July 2008, according to data compiled by Bloomberg.

OPEC Output

Crude production by the 12 members of the Organization of Petroleum Exporting Countries fell for a second month in July as Iranian output reached a 22-year low, a Bloomberg survey of producers, oil companies and industry analysts showed.

The number of VLCCs booked to haul Middle East crude fell to an 18-month low of 113 in July, according to Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group. That’s the weakest tally since January 2011, Sy said last month. A drop in bookings to carry the region’s crude to China was the biggest contributor to the decline, according to Sy.

The exchange’s assessments don’t account for owners cutting speed to reduce fuel costs, their biggest expense. The price of ship fuel, or bunkers, added 0.5 percent to $625.13 a metric ton, data compiled by Bloomberg from 25 global ports showed yesterday.

Charter rates for VLCCs on the benchmark voyage rose 4.7 percent to 35.97 Worldscale points, exchange figures showed.

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 VLCC hire costs on the benchmark route are 35.97 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes ships smaller than VLCCs, fell 0.6 percent to 619, a sixth consecutive decline, exchange data showed.

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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