Persian Gulf oil-tanker rates may decline on canceled bookings

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may fall for a 12th day on signs oil companies are canceling bookings and waiting for the market to drop. Companies provisionally hire ships subject to port approvals and other conditions. It can take between one day and one week for an oil company to commit irrevocably to a ship rental and it costs nothing to cancel a conditional booking. Oil companies are "just fixing and failing and fixing and failing," Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone today. "They make a deal, wake up the next morning, see the market is lower, and fail it."

Chartering officials withheld cargoes since the end of 2007 to temper the fastest gain in tanker rates in at least 16 years in November and December on the benchmark voyage between the Middle East and Asia. That may have created a backlog of cargoes that will curb further declines, according to Mansson.

No new tanker bookings were reported today by shipbrokers. The London-based Baltic Exchange's benchmark assessment for voyages to Asia fell 4 percent to 166.88 Worldscale points yesterday, almost half the level it reached on Dec. 18.

There are 114 modern tankers available for hire within the next 30 days, according to a report today from Paris-based Barry Rogliano Salles. Yesterday there were 115.

Flat Rates

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.

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 166.88 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $134,947 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 Nov. 15 it needs $30,000 a day to break even on each of its supertankers.

Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.