Tanker rates fall as demand eases

Dubai: The cost of delivering Middle East crude to Asia, the world's busiest route for supertankers, fell for a third session as demand weakened.

Charter rates for very large crude carriers, or VLCCs, on the Saudi Arabia-to-Japan route dropped 5.7 per cent to 113.42 Worldscale points, according to data from the London-based Baltic Exchange. That was the biggest one-day decline since November 9 and yields owners returns of $74,833 (Dh275,236) a day.

Oil companies "remembered that the way to counter was to withhold" cargoes, London-based EA Gibson Shipbrokers Ltd. said in a report Friday. Still, a 93 per cent jump in freight rates this year "indicates how finely the market is balanced and how little it takes for rates to skyrocket."

Weather-related delays in the Northern Hemisphere and increased demand to collect cargoes from ports in the Arabian Gulf and West Africa combined to constrain the supply of vessels, according to EA Gibson.

Nervous owners

Reduced demand has made owners "a little nervous," SSY Futures Ltd., a unit of the world's second-largest shipbroker, said. Income last year fell below what they needed to pay crew, insurance, repairs and other running costs.

"Rates are edging away," SSY said. "Fundamentals show a reasonably balanced list but sentiment has changed."

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.

Frontline Ltd., the biggest operator of VLCCs, needs $32,900 a day to break even on each of its supertankers once interest repayments are taken into account.

Income from Suezmax tankers that haul one million-barrel consignments fell 13.5 per cent to $52,040 a day, according to the Baltic Exchange. Aframaxes that transport 650,000 barrels gained 2.6 per cent to a daily $23,302.

Staying afloat