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.

Frontline Profit Falls 26 Percent

by Alaric Nightingale

Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, said first-quarter profit fell 26 percent after ship-hire rates dropped because of OPEC production cuts and the warmest winter on record.

Net income declined to $158.8 million, or $2.12 a share, from a restated $214 million, or $2.86 a share, a year earlier, Hamilton, Bermuda-based Frontline said today in a statement to the Oslo Stock Exchange. That beat the $100.3 million median estimate of 10 analysts surveyed by Bloomberg.

``Underlying trading looks a bit better than we expected,'' said Robin Byde, an analyst for HSBC Securities in London who has an ``underweight'' recommendation on the shares. Earnings ``look like a small positive,'' he said in an interview.

December to February was the warmest winter period on record, according to the U.S. National Oceanic and Atmospheric Administration, lowering refinery demand for crude oil. Tanker bookings also were curbed by the 1 million-barrel-a-day output cut that members of the Organization of Petroleum Exporting Countries started implementing in the fourth quarter of 2006.

Shares of Frontline climbed 0.5 Norwegian kroner, or 0.2 percent, to close at 255 kroner in Oslo, valuing the company at 19 billion kroner ($3.2 billion). They have climbed 37 percent this year. The profit included a $39.8 million gain from the sale of shares in Sea Production Ltd., a company that converts aging tankers into storage-and-production ships. Stripping out that gain, profit still beat analysts' estimates by $18.7 million.

Frontline deferred a gain of $155 million from the sale of shares of another company, Sea Lift Ltd., which will convert tankers to transport oil rigs, rig parts, bridges and other ships. Sales fell 25 percent to $362 million.

The profit decline was Frontline's first in three quarters. It reported a 0.6 percent increase in earnings in the fourth quarter after selling two vessels for gains of $73.2 million.

Frontline declared a cash dividend for the quarter of $1.50 a share. The payout is ``slightly disappointing,'' said Arne Roenning, an analyst for Fondsfinans AS in Oslo.

Earnings from Frontline's very large crude carriers, or VLCCs, slumped 31 percent to $50,200 a day while those from its 1 million-barrel carriers declined 29 percent to $34,900 a day. Break-even levels are $29,500 and $22,000 a day respectively.

Declines in freight rates are being exacerbated by a surge in shipbuilding, led by China and South Korea. Vessels equivalent to 34 percent of the world's existing tanker fleet are under construction, Frontline, led by Norwegian billionaire John Fredriksen, said today. The expansion ``gives some reason for concern,'' it said in the statement.

Employment of the global supertanker fleet may decline this year to 93 percent, from 96 percent last year, according to London-based shipbroker Galbraith's Ltd.

OPEC cut production by 1 million barrels a day by February as part of its commitment to trim excess supplies. OPEC is pumping enough crude to satisfy world consumption and has no need to review quotas before its September meeting, group president Mohamed al-Hamli said May 15.

Supertanker Prices May Stay Near Record

By Katherine Espina
May 14 (Bloomberg)

The price of supertankers able to ship 2 million barrels of oil may stay near records because of demand for vessels, shipbroker Poten & Partners said.

The demand for shipyard slots to build very large crude carriers hasn't slipped as prices have risen to more than $130 million, the New York-based shipbroker said in a May 11 report. The rate to hire a tanker on the benchmark route from the Persian Gulf to Japan has gained 67 percent this year.

``With charter rates firm and continued demand for ships strong it is likely that asset prices will be high for quite some time,'' said Poten & Partners. ``Any softening in freight rates may slow the momentum of orders, but will likely have little effect on the asset prices in the near term.''

Prices have risen to records as ship owners compete for space at yards. Record earnings for bulk carriers that ship coal, iron ore and other commodities has increased investment in that sector, taking potential berths for tanker building.

Ships equal to 30 percent of the current fleet of 490 VLCCs are on order, according to Poten & Partners.

I've moved Oil Tanker coverage to a new address:
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Persian Gulf Oil-Tanker Glut

Persian Gulf Oil-Tanker Rates May Extend Decline on Vessel Glut
By Alaric Nightingale
April 18 (Bloomberg)

The cost of transporting 2-million barrel consignments of crude oil from Middle East ports on supertankers may extend a three-week decline because there are too many ships available for hire.

About 104 tankers can reach Persian Gulf ports by May 18, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's already enough to cover the entire month's demand, based on April shipments. More vessels will become available later in the month, increasing the glut.

``There is still plenty of tonnage,'' Nikos Varvaropoulos, an oil-tanker broker from Optima Shipbrokers in Athens, said in an e-mailed note.

Kuwait Petroleum Corp., the state-owned oil company, booked the tanker Smiti to ship crude to the U.S. yesterday at a 21 percent discount to London-based Baltic Exchange's benchmark rate. The owners of Smiti, India's Essar Shipping Ltd., didn't try to negotiate over the rate, Varvaropoulos said.

Haggling over rates can last several days when owners believe prices will rise or if they think there may be a shortage of ships competing to haul the cargo. After offering to lease its tanker at 60 Worldscale points, Essar accepted Kuwait Petroleum's counter-offer at 40 points without further bartering, Varvarpoulos said.

Asian refineries account for about 70 percent of demand for Middle East crude. Rates for tankers plowing that voyage slumped to 53.44 points yesterday, a drop of 46 percent since March 26. Rates to the U.S. have declined 39 percent to 46.92 points since March 27.

Asian Demand

At 53.44 Worldscale points, VLCCs, can earn about $28,026 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.

At 46.92 Worldscale points, VLCCs, can earn about $21,650 a day on a 64-day round trip from Saudi Arabia to the Louisiana Offshore Oil Port in the Gulf of Mexico, based the same formula.

Daily returns from voyages to the U.S. are normally lower because the journey-lengths are longer, meaning owners can guarantee employment for their ships for a longer period.

At those rates, Frontline Ltd., the world's biggest carrier by capacity, may be losing money. The shipping line said Feb. 27 that it needs $30,200 a day to break even on each of its VLCCs.

Ship-fuel prices at Fujairah in the United Arab Emirates fell $7 to $346.50 a ton on April 17, their highest price in eight months, according to Bloomberg data.

I've moved Oil Tanker coverage to a new address:
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Asian Aframax Tanker Rates Drop

By Katherine Espina
April 18 (Bloomberg)

The rate to ship 80,000 tons of crude oil on Asian routes fell for a second day as refinery maintenance work cut oil demand, increasing ship supply.

The cost of shipping crude oil on so-called Aframax tankers to Singapore from Kuwait fell 1.1 percent to Worldscale 167.12, according to the London-based Baltic Exchange.

``In Asia, with refinery maintenance upcoming, cargo demand tailed off,'' said U.K-based shipbroker Simpson Spence & Young Ltd. in its latest weekly tanker report.

Refiners Nippon Oil Corp. and Royal Dutch Shell Plc. are shutting down plants in Asia next month for scheduled maintenance work. In addition, Aframax rates may be tracking the recent fall in the Very Large Crude Carrier market brokers said. VLCCs can transport more than 2 million barrels of oil.

``For the VLCC market, rates last week continued to decline with an ample supply of double-hull tonnage available, few April cargoes left to fix and the market awaiting May cargo stems,'' according to the weekly report by Simpson Spence & Young, the world's largest closely held shipbroker. Refinery maintenance pushed Aframax rates for 80,000 tons of crude oil to Japan from Indonesia lower by 25 points to Worldscale 165, according to the shipbroker.

Persian Gulf Tanker Rates May Snap 11-Day Decline

Persian Gulf Tanker Rates May Snap Eleven-Day Decline
By Grant Smith
April 12 (Bloomberg)

The cost of shipping Middle East crude oil to Asia may snap an 11-day slide as bookings by Exxon Mobil Corp. help reduce a surplus of vessels.

Exxon, the world's biggest publicly traded oil company, hired five tankers to collect cargoes in the last week of April, leaving 13 loads to pick up this month, according to an e-mailed report today from Paris-based shipbrokers Barry Rogliano Salles. There are about 18 so-called double-hulled tankers available to collect them, Athens-based Optima Shipbrokers said in an e-mail.

``There are plenty of ships to be honest but also plenty of cargoes,'' Mathieu Philippe, a broker for Barry Rogliano in Dubai, said in an e-mail. ``Some owners are ready to resist'' further discounts in freight rates.

Rates for Very Large Crude Carriers, or VLCCs, on the benchmark route to Japan fell an eleventh day yesterday to 58.6 Worldscale points, according to the London-based Baltic Exchange. One tanker, hired at a discount because it has only one layer around its cargo tanks, was booked at WS 52.5, Barry Rogliano said.

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 58.6 Worldscale points, owners of modern Very Large Crude Carriers, or VLCCs, can earn about $33,015 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 on Feb. 27 that it needs $30,200 a day to break even on each of its VLCCs. It made $56,500 a day hiring out its double-hulled tankers, 50 percent more than for its single- hulled vessels.

China’s Oil Tanker Boom

Lee Geng
Apr. 09, 2007
EnergyTribune.com

During the Ming Dynasty six hundred years ago,famed Chinesenavigator Zhengexplored the seas with his mighty fleet. Today, China is a manufacturing power, not a naval one. And that bothers the Chinese government. With oil imports of about 2.7 million barrels per day (nearly half of its total consumption), the government wants to double its fleet of supertankers by 2008.

At present, Chinese tankers only transport about 10 percent of the country’s oil imports. The government wants to increase that percentage to help ease concerns over energy security, avoid the possibility of shortages, and perhaps avert political frictions that could lead to delays or blocks on deliveries.

China currently has 23 300,000-deadweight tonnage (dwt) tankers, known as very large crude carriers, or VLCCs. Those VLCCs account for about 30 percent of China’s tanker tonnage and about 4 percent of the world’s fleet.

Most of the remaining tankers in China’s inventory are small and/or old, and thus better suited for the coastal trade than for international oil shipments. Chinese tankers on average are 30 percent older than their international counterparts and much smaller, averaging only 20,000 dwt (about one-fifteenth the size of a VLCC).

By 2010, China wants to have a VLCC fleet capable of shipping over 50 percent of its expected 4 million barrels per day of imports. By 2020, China plans a fleet of 70 VLCCs. Big Chinese shipping corporations are ordering VLCCs to achieve that target. China Merchants Group, with the country’s largest VLCC fleet, will add six before 2008, with China Ocean Shipping Corp. (COSCO) adding five. State-owned China Shipping Group (CSG) is operating three VLCCs and nine are on order for a total of 12 by 2010. This will allow it to boost its total annual capacity to over 100 million tons of oil.

COSCO operates eight VLCCs and has another seven under construction. One of China’s largest shipyards, Dalian Shipbuilding Industry Co., Ltd., has received more than 20 orders from both domestic and foreign companies for VLCCs, scheduled for delivery around 2009. Other players in the tanker business are ordering new vessels as well. Nanjing Tanker Corp. has plans to establish a fleet of 10 VLCCs. Hebei Ocean Shipping Co. has ordered three VLCCs and Nanjing Changjiang has ordered eight.

http://www.energytribune.com/articles.cfm?aid=445

I've moved Oil Tanker coverage to a new address:
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