Oil-Tanker Charter Costs Fall for Third Day as Surplus Expands

Charter costs for the biggest tankers hauling Middle East oil to Asia fell for a third session as demand slowed further amid a surplus of ships.
Booking rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slid 1.2 percent to 43.34 industry-standard Worldscale points, the lowest since May 28, figures from the London-based Baltic Exchange showed. Hire costs jumped 19 percent last week, the most this year. Each VLCC can hold 2 million barrels of oil.
There are 60 tankers available in the Persian Gulf over the next four weeks, Marex Spectron Group said in an e-mailed report today, compared with 52 at the start of the month, according to its data. The VLCC fleet’s carrying capacity will expand 5.1 percent this year, near demand growth of 5 percent, according to Clarkson Plc, the world’s largest shipbroker.
“The crude tanker market is coming further down as vessel supply is ticking back up again,” Erik Nikolai Stavseth, an analyst at Oslo-based Arctic Securities ASA, said in an e-mailed report today. “We continue to see downside to the recent spike.”
Daily earnings for VLCCs on the benchmark voyage fell 5.4 percent to $18,819 according to the exchange. Its assessments don’t account for owners’ efforts to improve returns by securing cargoes for return-leg voyages or reducing speed to burn less fuel, the industry’s biggest expense.
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 43.34 percent of the nominal Worldscale rate for that voyage.
The biggest one-day change for ships hauling crude was for tankers heading to the U.S. East Coast from the Caribbean, which gained 2.3 percent to 122.25 Worldscale points. For vessels shipping refined fuels, the largest move was for tankers heading to the East Coast from Europe, which fell 2.2 percent to 122.92 points, according to the exchange.
Source: Bloomberg