Most VLCC freight rates out of Persian Gulf at 4-year lows

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Tuesday, 24 March 2009

The OPEC production cut coupled with low demand for crude by Asian refiners has seen the number of loadings on Very Large Crude Carriers out of the Persian Gulf touch a five-year low in March 2009, shipping sources said Monday. The freight rate on the Persian Gulf-US Gulf route, based on a dollar per metric tonne assessment, also fell to a four-year low of $11.59/mt on March 20.
The number of cargoes covered in March was reported at 82. The previous lowest monthly figure of loadings out of the Persian Gulf was in November 2008 at 93.
Between 2004 and 2007, the lowest monthly loadings stood between 97 and 99 cargoes.    
With many Asian refiners, especially the ones in the Far East, heading into turnarounds, the demand for spot vessels have fallen.
According to a report by the US-based consultancy Energy Security Analysis, or ESAI, at least 1.6 million b/d of Asian refining capacity will be taken offline between April and May when the Japanese and South Koreans hit the turnaround season.
While the number of spot cargoes coming out of the Persian Gulf has dropped, so, too, have the freights rates on some of the key routes.
"The activity is low on that route. Normally 30 cargoes are available for the West [from the Persian Gulf]. But last month only 10 cargoes were done," a VLCC owner said, adding that the requirement for spot cargoes have dipped with oil available from the floating, storage vessels stationed in the US Gulf.
Platts' $/mt assessments are calculated using a basket of flat rates on each region to region voyage, which are then multiplied by each day's Worldscale assessment.
The freight rate on the benchmark Persian Gulf-Japan voyage also fell to a four-year low of $7.02/mt on March 20. The rate on the Persian Gulf-Far East route touched $8.02/mt on March 23, after seeing a four-year low of $7.20/mt recorded on March 17. 
The Persian Gulf-UK Continent and Persian Gulf-Mediterranean routes were assessed at a three-year low $11.84/mt and $8.02/mt, respectively.
Meanwhile, the owners' daily earnings on a VLCC have plummeted to close to $29,850/day, which many sources said was the lowest in recent times.
"In my experience, the lowest level was in 2002," a source with a vessel owner said, adding double-hulled vessels then were earning close to $20,000/day.
Source: Platts