Bloomberg News

Oil-Tanker Returns Fall as Ship Supply Seen Balanced With Demand

January 09, 2013

Returns for the biggest oil tankers hauling Middle East crude to Asia, the industry’s busiest trade route, fell for a ninth session on speculation cargo demand matched vessel supply.

Daily earnings for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage lost 4.8 percent to $14,381, figures from the Baltic Exchange in London showed today. That was the lowest level since Nov. 13. Charter costs for the ships dropped for a second day, leaving them little changed from 2013’s first session.

Hire rates were steady even as VLCC bookings increased at the start of the year, the consulting unit of Oslo-based shipping-services and investment-banking company Astrup Fearnley said in an e-mailed note today. Vessel supply remained “ample,” it said, predicting little change in costs.

“There should be enough ships to meet demand, which should again keep rates at current levels,” Kevin Sy, a Singapore- based freight-derivatives broker at Marex Spectron Group, said in an e-mailed report today.

The VLCC fleet will expand 5.3 percent this year, below demand growth of 6.3 percent, according to Clarkson Plc, the world’s largest shipbroker. Each of the tankers can hold 2 million barrels of crude.

Return Journeys

The exchange’s assessments don’t reflect speed cuts aimed at reducing fuel costs, vessel owners’ largest expense. They can boost returns by slowing ships on return journeys after unloading cargoes. The cost of marine fuel was unchanged for a third session today at $620.65 a metric ton, according to figures compiled by Bloomberg from 25 ports.

Charter costs for VLCCs on the benchmark voyage declined 0.7 percent to 42.64 industry-standard Worldscale points, exchange data showed. That compared with 42.65 on Jan. 2.

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 42.64 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, slid for a ninth session to 654, according to the exchange. That was the lowest reading since Oct. 1.

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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