Monday, March 23, 2009
Oil tanker rates rise but vessel supply up
Monday, 23 March 2009
The cost of delivering Middle East crude to Asia, which gained for the first time in eight days yesterday, may curb its advance because there are too many vessels for hire. "There are lots of vessels and not so much cargo," Nikos Varvaropoulos, an official at Optima Shipbrokers, said by email yesterday. While an oversupply of carriers hasn't changed for the past several days, there's been an increase in demand for tankers to load in the first 10 days of April, he said. That may "make owners positive" they can buoy rental rates, he said.
Fuji Oil Co, a Japanese refinery unit of AOC Holdings Inc, hired the tanker Yakumosan for 38.5 Worldscale points, according to Optima. That's 3.4 per cent above the London-based Baltic Exchange's benchmark rate of 37.23 points for Saudi Arabian consignments to Japan.
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 US dollars, 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.
A rate of 37.23 points works out at $27,791 (Dh101,993) a day, according to the Baltic Exchange. Globally the carriers are making $21,981 a day. Frontline Ltd, the largest owner of the vessels, said February 26 it needs $32,100 a day to break even on each of its supertankers, a 7.5 per cent decrease compared with November 28.
Frontline's breakeven rate is the amount needed to cover daily running costs for each ship, interest and scheduled loan repayments, and corporate overhead costs. It doesn't take into account capital spending requirements, final loan repayments, or ships hired from other owners for short-term purposes.
Frontline doesn't necessarily need to earn $32,100 from vessels competing for single-voyage cargoes to be profitable because it also has ships leased out on longer-term, fixed-rate rentals earning better returns, Inger Klemp, chief financial officer of the company's management unit, said March 11.
Source: Bloomberg
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