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Persian Gulf Tanker Rates May Rise on Restocking, Record Fuel |
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Saturday, 19 April 2008 |
 The cost of shipping Middle East oil to Asia, the world's busiest route for supertankers, may rise for a seventh day on record refueling prices and as refineries hire tankers to replenish oil stockpiles. The Singapore price of ship fuel, or bunkers, yesterday climbed 0.4 percent to a record $533.50 a metric ton, according to data compiled by Bloomberg. Owners of very large crude
carriers, or VLCCs, slowed the vessels down over the past week, a move
that conserves fuel and cuts ship supply, according to AISLive data
compiled by Bloomberg.
``Demand for April and the start of May has been stronger than most
people expected,'' Nikos Varvaropoulos, a broker at Optima Shipbrokers
in Athens, said in e-mailed note today. ``The rising price of fuel
means owners have to put up prices just to maintain the same earnings.''
Fuji Oil Co. hired the tanker Taizan for up to 128 Worldscale points,
according to a report today from Oslo-based shipbroker PF Bassoe AS.
That's 2.5 percent above the London-based Baltic Exchange's benchmark
assessment of 124.94 points for voyages to Asia.
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 U.S. dollars a ton, are revised annually by the Worldscale
Association in London to reflect changing fuel costs, port tariffs and
exchange rates.
Hire 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.
At 124.94 Worldscale points, owners of VLCCs can earn about $88,621 a
day on a 39-day round trip from Saudi Arabia to South Korea, based on a
formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg
marine-fuel prices.
Frontline Ltd., the world's biggest VLCC operator, said Feb. 15 it
needs $31,400 a day to break even on each of its supertankers.
Demand for ships may be rising as refineries that allowed crude oil
stocks to decline now buy extra cargoes to rebuild those inventories,
Varvaropoulos said.
Vessel demand is normally boosted when oil derivatives are above the
physical cost of the material, a pricing structure known as contango.
Such a pricing enables traders to purchase oil and offset some of the
storage or transportation costs by selling it for more at a later date,
using derivatives.
With the price structure being subject since last year to
backwardation, meaning futures are below present prices, refineries may
have delayed cargo purchases, Varvaropoulos said. Such pricing may have
helped to deplete oil inventories globally, forcing traders to hire
extra ships now to cover the stocks shortage, he said.
Global crude oil inventories are ``low'' globally and refineries,
particularly in the western hemisphere, may seek tanker loads of crude
to replenish their stockpiles, Morgan Stanley analysts Darren Gacicia,
Ole Slorer and Abdiel Santiago in New York wrote in a report to clients
on April 15.
Source: Bloomberg
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