The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may curb gains because too many ships are competing for cargoes.
Vessel oversupply is hindering owners' efforts, said Charlie Fowle, a director at London-based Galbraith's Ltd., a 263-year- old London shipbroker. At the same time, more bookings and reluctance from owners to lease their ships at unprofitable rates is pushing rates higher, he said.
"In the Arabian Gulf there's just a little bit more demand," Fowle said by phone today, adding that it will take a 10 percent increase in cargo demand to eliminate a glut of ships that are vying for cargoes. PTT Pcl, Thailand's biggest energy company, hired the tanker Spyros at a rate of 64 Worldscale points, according to a report yesterday from Athens-based Optima Shipbrokers. That's 1.9 percent above the London-based Baltic Exchange's assessment of 62.8 points for a comparable voyage to Singapore.
Spyros probably cost more to hire than the benchmark because it's fitted with two steel hulls to cut the risk of an oil spill in the event of an accident. The exchange assessment also includes bookings of one-hulled vessels that normally cost less.
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 62.80 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $16,917 a day on a 25-day round trip from Saudi Arabia to Singapore, based on a formula by R.S. Platou A/S, an Oslo-based shipbroker, and Bloomberg marine fuel prices. While owners are trying to refuse to book, or fix, their vessels because the record cost of refueling is making shipping cargoes unprofitable, most are still doing so, said Fowle. "People have got to fix and they will fix," he said. "At the end of the day, it's still better than doing nothing, it's still making a positive contribution" to operating expenses, when owners lease out their ships.
Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $30,000 a day to break even on each of its supertankers. Different owners break-even levels depend on their fuel-hedging contracts and their finance costs.
About 51 available vessels can reach Middle East ports by Dec. 14, Paris-based shipbroker Barry Rogliano Salles said in a report today. Refineries still need to arrange about 40 outstanding bookings for the first half of the month, it added.
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.
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