Bloomberg News

Oil-Tanker Returns Fall Below $10,000 as Ship Bookings Decline

January 21, 2013

The largest oil tankers hauling Middle East crude to Asia, the industry’s busiest trade route, earned less than $10,000 a day for the first time in 10 weeks as bookings of the vessels declined.

Daily returns for very large crude carriers on the benchmark route between Saudi Arabia and Japan slumped 11 percent to $8,994, figures from the London-based Baltic Exchange showed today. That was the first time since Nov. 12 earnings were less than $10,000. They rose only once so far this year, on Jan. 16.

Limited demand to hire VLCCs “pressured” rates, according to Oslo-based investment bank RS Platou Markets AS. An ample supply of vessels available to load cargoes in the Persian Gulf is expected to curb an increase in rates, Marex Spectron Group said in an e-mailed report. Each of the tankers can hold 2 million barrels of crude.

“The current fixture count is starting to lag behind last month’s pace, so activity should pick up after today,” Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron, said in the report. “But with tonnage still well supplied, the increase in activity is unlikely to suddenly send rates higher.”

Charter rates for VLCCs on the benchmark voyage slid 1 percent to 39.67 Worldscale points, the exchange said. That was a ninth decline in 10.

Growth in Demand

The combined carrying capacity of the world’s VLCCs will expand 5.3 percent this year, below demand growth of 6.3 percent, according to estimates from Clarkson Research Services Ltd., a unit of the largest global shipbroker.

The exchange’s assessments don’t reflect speed cuts aimed at curbing use of ship fuel, or bunkers, the industry’s biggest expense. The price of fuel rose 0.4 percent to $623.78 a metric ton on Jan. 18, according to figures compiled by Bloomberg from 25 ports. Costs were the highest since October a week earlier.

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 39.67 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, gained 0.5 percent to 633, according to the exchange. That was the gauge’s first increase since Dec. 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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