Persian gulf tanker rates may gain as mid-February demand gains

The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may gain for a third day as refineries seek ships to load around mid-February, swinging vessel-supply in owners' favor. The number of very large crude carriers, or VLCCs, that are available for hire within the next 30 days diminished 14 percent to 84, according to reports from Paris-based shipbroker Barry Rogliano Salles. Refineries need to find tankers for about 50 remaining February cargoes, according to the broker's data. There are "not that many" VLCCs for hire on the spot market for immediate delivery, said Charlie Fowle, a director at London-based shiproker Galbraith's Ltd. Gains are led by demand for double-hull VLCCs that cut the risk of oil spills, he said.

GS Caltex Corp., South Korea's second-largest oil refiner, hired the tanker Titan Mercury for 91.5 Worldscale points, according to Barry Rogliano. That's 5.5 percent below the London-based Baltic Exchange's benchmark assessment of 96.88 points for voyages to Asia.

Titan Mercury, built in 1989, is too old for inclusion in the benchmark, which only takes into account rental rates for ships up to 15 years old. It also has one hull separating its cargo from the ocean. About 86 percent of the carriers built since Jan. 1993 have two steel hulls and normally cost more to hire because they're safer in the event of an accident.

Single-hull ships currently cost about 15 percent less to hire than double-hulls, according to a report today from Fearnley Fonds AS. GS Caltex plans to stop using such carriers from 2009 after the tanker Hebei Spirit had the worst oil spill in South Korea's history when it was struck by a crane in December.

Forward Freight

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 96.88 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $62,157 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.

Derivative contracts that indicate the future price of shipping crude oil also advanced.

Forward freight agreements for Middle-East Japan VLCCs in February advanced 4.1 percent to the cash equivalent of $104,000 a day, according to prices from the largest broker of the contracts, Imarex NOS ASA, as of 9:54 a.m. in Oslo.