30 September 2011

Oil-Tanker Losses Double as Growth in Supply Overwhelms Demand:

Losses for owners of supertankers hauling 2 million-barrels of crude oil to Asia from the Persian Gulf more than doubled as a glut of ships overwhelms demand.

Very large crude carriers, or VLCCs, on the benchmark Saudi Arabia-to-Japan route are losing $4,452 a day, compared with $2,116 yesterday, according to data from the Baltic Exchange in London. Rates have been negative since Aug. 26, according to the exchange, which covers more than 50 maritime routes.

“The excess supply limits the probability of any short term increase in rates,” Martin Korsvold, an analyst at Pareto Securities AS in Oslo, wrote in an e-mailed report today.

Global demand for supertankers will expand 5.2% this year to 144.3 million deadweight tons, according to Clarkson Research Services Ltd., a unit of Clarkson Plc, the world’s largest shipbroker. The fleet will swell almost twice as fast, expanding 9.9% to 176.9 million tons, it estimates.

Rental income can be boosted by reducing a ship’s speed on a return journey after a vessel has unloaded its cargo, saving fuel costs. The price of ship fuel, or bunkers, advanced 25% from the start of the year to $636.50 a metric ton, data compiled by Bloomberg from 25 ports worldwide showed.

Earnings estimates from the exchange don’t reflect speed alterations that can cut fuel consumption. Owners have yet to curb the glut either by reducing speeds, scrapping ships or mothballing tankers, even with rates on about 3-quarters of routes at “multi-year” lows, Goldman Sachs Group Inc. analyst Edouard Baldini in London wrote in a Sept. 19 report.

Charter rates for VLCCs on the benchmark voyage decreased 2.9% to 42.68 Worldscale points, according to the exchange. The 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.

The Baltic Dirty Tanker Index, an overall measure of shipping crude oil that includes vessels smaller than VLCCs, was unchanged at 693 points, according to the exchange.

Source: Bloomberg. By Rob Sheridan (rsheridan6@bloomberg.net). 28 September 2011

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