Mideast crude tanker rates stay firm, upside eyed
Tuesday, 01 May 2012 | 14:52
Crude oil tanker earnings on the major Middle East route stayed firm on Monday, helped by a push for cargoes and tighter vessel availability.
The world's benchmark VLCC export route from the Middle East Gulf to Japan DFRT-ME-JAP reached W64.88 in the worldscale measure of freight rates, or $32,894 a day when translated into average earnings, from W64.63 or $32,633 on Friday and W53.63 or $16,390 last Monday.
"The relative strength in the VLCC market has been supported by extremely high Middle East OPEC production and as a result, very active spot chartering enquiry over the past few months," broker E.A. Gibson said.
"At the same time, tonnage availability was lowered as many tankers had been operating at slower speeds when trading conditions were exceptionally dire."
A rush of fixings earlier this month from Saudi Arabia to the United States, together with buoyant Asian demand, bolstered sentiment as buyers sought to ensure stable supplies, given growing fears of disruptions due to the tensions with major oil producer Iran.
Earlier this month earnings reached their highest in a year at the $45,000 a day level, fuelled by the cargo rally.
"The higher enquiry for immediate cargoes was coupled with a limited prompt tonnage list, after the strong fixture levels in March and April depleted the available fleet," Deutsche Bank said.
"The forward supply still remains elevated, and we could see rates move in either direction over the next week or two depending on mid-May fixture levels."
Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees. VLCC operating costs, including financial costs, are estimated at around $10,000 a day.
Average VLCC earnings have been volatile in recent months, falling below the $10,000 a day level a number of times. They have stayed above $10,000 a day since Feb. 15.
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W41.66 from W41.32 on Friday and W38.61 last Monday.
Tanker players said the outlook remained challenging, with downside risks for the sector given worries about the global economy and the fact that more tankers, ordered when times were good, were still to hit the global fleet. High bunker fuel costs were also eating into earnings.
"There is still an overhang of tonnage in the crude tanker market, and we forecast supply growth to exceed demand growth through 2013," Pareto Securities said on Monday.
Industry association INTERTANKO told Reuters a full recovery in the overall oil tanker market may not arrive until 2014.
Cross-Mediterranean aframax tanker rates were at W99.77 or $11,167 a day on Monday, compared with W101.14 or $12,171 a day on Friday and W101.95 or $13,086 a day last Monday.
Rates for suezmax tankers on the Black Sea to Med route reached W74.54 or $9,925 a day from W72.88 or $8,640 a day on Friday and W63.38 or $980 a day last Monday. Brokers said sluggish activity had kept earnings within a tight range in the past few days.