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Friday, June 12, 2009

VLCC spot rates continue rise on 'accelerated activity'

Friday, 12 June 2009

Spot VLCC activity in the MEG has continued to rise this week, reducing tonnage oversupply and putting rates on the ascent, brokers told Tankerworld. MEG-East voyages were commanding close to WS 40 last week compared to low WS 30s in the previous week, but brokers tell Tankerworld that rates have picked up close to 10 Worldscale points over the past three days.
Fearnleys for example says MEG-Japan and MEG-Singapore voyages are being fixed at WS 52.5 this week.
In a note to Tankerworld on Wednesday, Dahlman Rose said that “the VLCC market has firmed on accelerated activity” with freight earnings to move crude from the MEG to the Far East surpassing $25,000 per day per vessel.
The benchmark MEG-Korea route was earning about $19,000 per day per vessel last week.
On Tuesday, 10 VLCCs were fixed to move MEG crude to the Far East, according to Dahlman Rose, and a further 6-7 fixtures were being concluded on Wednesday, with 4 headed to the US.
IMAREX reported that spot VLCC activity surged on Tuesday as 12 new cargoes were covered and at higher rates.
“The fixture count out of the Arabian Gulf for the June program stands at around 70, ahead of the pace of previous months, particularly last month when rates fell to lows below $10,000 per day [per vessel],” said Dahlman Rose.
Going forward, IMAREX said “the cargo list is still long, so we don't expect activity to cool off just yet.”
Brokers tell Tankerworld that average cash break-even earnings for the VLCC spot market are below $25,000 per day per vessel, but break-even rates are calculated differently across the industry, with some companies like Frontline Ltd. reporting its break-even rate as high as $34,700 per VLCC.
VLCC specialist Knightsbridge Tankers Ltd recently pegged its average cash break-even rate for its VLCCs at $19,200 per day per vessel.
Another VLCC specialist Independent Tankers Corporation Limited (ITCL) declared an average cash break-even rate for its VLCCs at approximately $19,100 per day per vessel as at the end of May.
Source: TankerWorld