Business | Shipping
Gulf tanker rates could end decline
The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may halt a seven-day drop on signs that demand for vessels for next month is strengthening.
- Bloomberg
- Published: 23:17 July 12, 2008
London: The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may halt a seven-day drop on signs that demand for vessels for next month is strengthening.
While most August vessel bookings have yet to begin, there are signs of shippers "sniffing about," said Per Mansson, managing director of shipbroker Nor Ocean Stockholm.
"The market is finally off the blocks," he said. An increase in August bookings is likely to boost rental rates by as much as nine per cent next week, Mansson said.
ConocoPhillips, the second-largest US refiner, hired the tanker Astro Cygnus at a rate of 233.5 Worldscale points for a cargo to Malacca in Malaysia, according to a report on Saturday from Athens-based Optima Shipbrokers.
That's 0.8 per cent below the London-based Baltic Exchange's comparable assessment of 235.47 points for a shipment to Singapore.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in US dollars a tonne, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.
Earnings
At 235.47 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $177,991 a day on a 25-day round trip from Saudi Arabia to Singapore, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine-fuel prices. Longer voyages to Ulsan, South Korea, are paying $188,770.
Frontline, the world's biggest VLCC operator, said May 22 it needs $31,500 a day to break even on each of its supertankers.
Freight derivative contracts may also advance. Contracts reflecting the average cost of shipping oil from the Middle East to Asia this month are trading at 226 Worldscale points, according to data from Imarex. That's 5.2 per cent below this month's actual average price.
Ships are speeding up and fewer are waiting at anchor, a sign vessel supply may expand, according to ship-tracking data compiled by Bloomberg.
The average VLCC is sailing at 10.5 knots, the fastest since Bloomberg began compiling the data on May 5. Sixty-two are at anchor, compared with 95 on June 5.
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