Wednesday, June 13, 2007

Persian Gulf Tanker Rates May Extend Decline

Persian Gulf Oil-Tanker Rates May Extend Decline on Ship Supply
By Grant Smith
June 13 (Bloomberg)



The cost of shipping Middle East crude oil to Asia, which rose for the first time in 18 days yesterday, may extend this month's 10 percent decline because of excess supplies.

A surplus of spare supertankers has accumulated after routine maintenance among Chinese refiners in May damped oil imports. There are almost as many ships available for the first two weeks of July as will be needed for the entire month, according to an e-mailed report today from Paris-based shipbrokers Barry Rogliano Salles.

``Rates are taking a small step forward but are still under pressure, with plenty of tonnage available for the remainder of June and into early July,'' Nikolaos Varvaropoulos of Optima Shipbrokers said in an e-mail from Athens.

Freight rates for very large crude carriers, or VLCCs, on the benchmark route to Japan, rose 0.1 percent yesterday to 69.14 Worldscale points. Rates have lost 22 percent in the past four weeks, according to the London-based Baltic Exchange.

Rates temporarily halted their slide yesterday as owners refused to offer further discounts on the vessels they hire, Halvor Ellefesen of shipbrokers SeaLeague AS said in an e-mail.

China's crude oil imports rose at the slowest pace in four months in May, customs figures released in Beijing yesterday showed. The imports rose 4.7 percent to about 3.1 million barrels a day. There are 91 supertankers free to July 13, compared with 103 cargoes that typically load in the Persian Gulf each month, Barry Rogliano said.

Break Even

Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, 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.

At 69.14 Worldscale points, owners of modern VLCCs can earn about $41,337 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.

Frontline Ltd., the world's biggest oil-tanker company by capacity, said May 30 that it needs $29,500 a day to break even on each of its VLCCs.