Bloomberg News

Persian Gulf Largest Oil-Tanker Glut Seen Curbing Rate Increase

March 01, 2013

Hire costs for the biggest oil tankers plying the industry’s busiest trade route were unchanged today, as a glut of ships available in the Persian Gulf curbed rates.

Charter rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage stayed at 32.28 industry- standard Worldscale points, figures from the London-based Baltic Exchange showed today. That’s within six percent of the lowest level this year, the data showed.

The surplus of vessels available to load in the gulf over the next four weeks shrank by three tankers to 89, according to data from Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group. That compared with 96 tankers last week, Marex Spectron data showed. Still, the surplus of ships will curb any gain in rates, as there are “more than enough ships to meet demand,” according to Sy.

“Low Persian Gulf production is not conducive for increased exports,” Erik Nikolai Stavseth, an analyst at Oslo- based Arctic Securities ASA, said in an e-mailed report today. The VLCC market remains “stuck in a slump,” Stavseth said.

Daily losses for VLCCs on the benchmark route as determined by the exchange narrowed to $3,082 from $4,105 yesterday. The ships were losing an average of $5,072 a day last month, exchange data show. Each tanker can hold 2 million barrels of oil, and VLCCs hauling Middle East crude to Asia earned money in only four sessions in the third quarter.

The exchange’s assessments fail to account for owners’ efforts to improve returns by securing cargoes for a voyage’s return leg or reducing speed to burn less fuel, known as slow- steaming.

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 32.28 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, added 0.4 percent to 700, staying at the highest this year, 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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