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Monday, August 10, 2009

Tanker rates surge as rising crude prices boost bunker fuel costs

Monday, 10 August 2009

The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, posted its best weekly gain in two months as rising ship-fuel costs prompted owners to demand higher rates. Rental costs on the benchmark Saudi Arabia to Japan route advanced 0.9 per cent to 39.5 Worldscale points in London on Friday, taking their five-day gain to 14 per cent. Income from renting ships for the voyage fell 0.9 per cent to $13,304, according to the bourse, which takes into account changing ship fuel, or bunker, prices to calculate owners' returns.
Bunker prices have more than doubled to $428 a metric ton in Rotterdam this year as crude oil gains, according to data compiled by Bloomberg. That pushes up owners' biggest expense and means they must charge more to maintain earnings.
"The trend is up on the crude price and consequently bunkers," Halvor Ellefsen, a shipbroker at SeaLeague in Oslo, said by e-mail Friday. Owners "have to price in a risk for further increases" when setting rates to lease ships, he said.
Last week's advance was the biggest since the week ended June 12, when the Worldscale rate climbed 41 per cent.
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 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.
The supply of very large crude carriers, or VLCCs, in the Middle East has declined "maybe slightly, but there's still enough tonnage" to collect the remaining August cargoes, Ellefsen said.
Owners need "a steady flow of fresh cargoes early this week to support the present momentum, otherwise they will find themselves struggling hard to maintain current levels," Oslo-based shipbroker PF Bassoe wrote in an e-mailed report Friday.
Source: Bloomberg