VLCC Ovatella, managed by Shell, owned by Frontline Tankers, image courtesy Frontline

SINGAPORE (Dow Jones)–Asia’s crude-tanker markets may stay supported on the back of healthy demand in the coming week, though upside is limited, as supply is also healthy.

The spot rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Monday at Worldscale 57.74, down from the week-earlier level of W58.91, according to the Baltic Exchange. Cash earnings for owners were assessed at $14,457 a day.

Although fixture enquiries were brisk, with a steady flow of cargoes for the last third of December hitting the market, “tonnage in the region was sufficient to absorb the increased activity,” broker Simpson Spence & Young said in a note.

Meiwa International, another broker, said 129 cargoes have been fixed to be lifted this month, up from 110 lots a year ago.

Fixing of January-lifting cargoes will begin next week, but freight rates likely won’t change much due to balanced fundamentals, a Japanese broker said.

The spot rate for a VLCC from West Africa to China softened to W57.50 from W59.77, around its lowest in a month.

Also, the rate for an 80,000-ton Aframax from Southeast Asia to the east coast of Australia inched up to W103.83 from W103.11.

Freight rates for vessels carrying clean petroleum products have slipped over the past week, as fixing activities are slowing ahead of the holiday season.

“This is a typical December market…everyone is just going on holiday,” said a Singapore-based broker.

The rate for a 30,000-ton tanker from Singapore to Japan fell to W152.79, a two-week low, from W157.57 last Monday.

The rate for a 55,000-ton Long-Range-1 cargo from the Middle East to Japan eased to W120.54 from W123.77, while a 75,000-ton LR-2 cargo for the same route edged upward to W102.68 from W102.63.

-By Max Lin, Dow Jones Newswires

Excess shipbuilding capacity has grown each year since 2009 by 25%, and is a painful process to reverse, Cutler said.

Panamax vessels traditionally haul dry bulk cargo–such as coal, grains and iron ore–and are mostly 70,000-75,000 deadweight tonnes.

Dry bulk freight rates have fallen in recent months as slower demand triggered by economic concerns and vessel oversupply took their toll on shipping rates.

“Long-term recovery in freight is only possible if ship owners exercise restraint with new buildings,” Cutler said.

-By Neena Rai, Dow Jones Newswires

The VLCC Front Shanghai, owned by Frontline Tankers, image courtesy Frontline

LONDON (Dow Jones)–The shipping costs for Very Large Crude Carriers, or VLCCs, traveling from the Arabian Gulf soared this week, supported by a tight market and strong seasonal demand from Asia, ship brokers told Dow Jones Newswires Thursday.

Freight rates for tankers traveling from the region rose 10%-14% from Wednesday to Thursday, depending on their destination, according to data from Riverlake Research & Consulting.

“There are very few ships for end November positions,” said one shipbroker. World Scale 60 is in sight, compared to rates in the mid to high 40s last week, he added.

World Scale is an index against which freight rates are based.

By Sarah Kent and Neena Rai, Dow Jones Newswires

Sea Force, a 305k DWT VLCC, image courtesy Frontline Tankers,

SINGAPORE (Dow Jones)–Asia’s crude tanker markets may see continued support in the coming week due to healthy demand, while improving gasoil demand in Europe will likely support ships carrying clean petroleum products.

The spot rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Monday at W49.71, versus W49.03 a week ago, Baltic Exchange data showed. Cash returns for owners were assessed at $338.

With booking not yet completed, 108 cargoes have already been fixed for lifting this month, up from 106 a year ago, according to broker Meiwa International.

“There are plenty of vessels around but…owners will likely resist lower rates” due to surging bunker prices, the broker said.

The spot rate for a VLCC from West Africa to China was at W54.35, up slightly on week from W54.23.

Meanwhile, the 80,000-ton Aframax rate from Southeast Asia to the east coast of Australia fell to W95.63 from W98.33.

Freight rates for vessels carrying clean petroleum products will likely begin to recover on tightening vessel availability in the Middle East, where gasoil exports to Europe are rising due to seasonal demand.

“The Middle East-West is doing very well now,” which is correspondingly supporting rates for eastbound shipments, a Singapore-based broker said.

The rate for a 55,000-ton LR-1 cargo from the Middle East to Japan Monday rose on week to W113.64 from W110.00, but the rate for a 75,000-ton LR-2 cargo for the same route fell to W105.75 from W107.18.

The rate for a 30,000-ton tanker from Singapore to Japan Tuesday inched down to W149.86 from W150.93 a week ago.

-By Max Lin, Dow Jones Newswires

Image courtesy Frontline

SINGAPORE (Dow Jones)–Asia’s crude-tanker market may stay in the doldrums due to a supply overhang, despite stable chartering activity for September-loading cargoes.

The spot rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Tuesday at Worldscale 47.32, or minus $207 a day, down from the week-earlier level of W47.55, according to the Baltic Exchange.

“Despite good fixing activity, the rate failed to move much higher due to the long list of available tonnage,” said DnB NOR ASA said in a research note.

Oslo-listed tanker giant Frontline Ltd. (FRO.LN) said Friday that it swung to a $35.2 million net loss in the second quarter, citing prolonged weakness in freight markets.

While the upcoming European Union embargo on Syrian oil exports could provide support to freight rates for Mediterranean-Asia routes, as the country would need to find buyers in other regions, the impact isn’t yet clear due to Italy’s objection to the timing of the start of sanctions.

The rate for a VLCC from West Africa to China hovered around its year-to-date low of W43.15 Tuesday, as the 80,000-ton Aframax rate from Southeast Asia to the east coast of Australia fell to W94.67 from the week-earlier level of W94.89.

Firm naphtha demand continued to support freight rates for carrying clean petroleum products, though slower chartering of gasoline and middle distillate cargoes exerted downside pressure.

The rate for a 55,000-ton LR-1 cargo from the Middle East to Japan rose to W152 Tuesday from W145.19 a week ago, but the rate for a 75,000-ton LR-2 cargo for the same route fell by 0.58 to W124.30.

The rate for a 30,000-ton tanker from Singapore to Japan fell to a one-month low of W155.96 Monday, versus its week-earlier level of W158.57.

-By Max Lin, Dow Jones Newswires

By Neena Rai, Dow Jones Newswires, Image by Andrew Winning/REUTERS

LONDON (Dow Jones)–A restart of Libyan oil exports will lead to a renewed fixing of tankers, which should boost Mediterranean freight rates in 2012, Peter Sand, chief shipping analyst at The Baltic and International Maritime Council told Dow Jones Newswires Tuesday.

“In 2009, Libya exported 1.33 million barrels of oil. Assuming this is the export target in 2012, where most is crude oil shipped off in tankers and the rest various oil products, a monthly demand for 60 Aframax vessels and 30 Medium Range product tankers is what’s in sight,” Sand said.

Sand said the tanker market should be boosted by resumed oil production and subsequent exports out of Libya, as well as a need to restore the Strategic Petroleum Reserves that were drawn upon due to the recent International Energy Agency intervention.

In July 2011, the IEA said its 28 members would make available 60 million barrels of oil from their emergency stocks to offset lost supplies from Libya, in an attempt to balance the market and prevent shortages.

Prior to the war, Libya produced 1.57 million barrels of crude oil a day. Following the outbreak of violence, output dropped by 80% to around 250,000-300,000 barrels a day since March, most of which is said to be consumed domestically, leaving little room for exports.

Libya’s violence significantly lowered tanker demand in the Mediterranean, in particular Aframax demand from Libyan ports, together with a halt in oil product exports. Libya’s main customers of crude oil are Italy, Germany, France and Spain.

Sand warned, however, that Libya’s path back to normality could be a difficult one, if damage has occurred to oil export infrastructure, pipelines or production facilities.

“Libyan crude oil is quite waxy, so if a pipeline has been left inactive for a long time it may have clogged up. This leaves two to three months of maintenance before the clogged up pipelines can be used normally. But to what extent the grid of pipelines needs to be worked on before full production can resume remains one of the key chokepoints in the recovery,” Sand said.

Image courtesy Frontline

LONDON (Dow Jones)–Very Large Crude Carrier shipping rates on the benchmark Middle East to Japan route (Ras Tanura/Chiba) settled at a one-month high Tuesday due to higher cargo bookings, but vessel oversupply will limit any significant gains, Richard Arnesen, Global Head of Tankers at Oslo-based Spectron Energy Services, said Wednesday.

On Aug. 23, VLCC rates on the Middle East to Japan route, or TD3, settled at a one-month high of $2,659/ton (average earnings) or W47.50 in the Worldscale measurement of shipping rates.

Worldscale is a methodology used to establish payment of freight rates for an oil tanker’s cargo. In negotiating a price to pay, the rate is referred to as WS100, or 100% of Worldscale.

“The charterers had been a bit slow to work their cargoes into the market and all of sudden we saw more cargoes being worked at the same time. So now the owners are trying to get the rates up a little bit, but there are still too many ships around for any major change in rates,” Arnesen said.

With opposition forces now in control of much of Libya’s oil fields, refineries and export terminals, Libyan crude could start returning to world markets, which could boost aframax Med rates, Arnesen said. “There will be cargoes leaving from Libya which can only help.”

Libyan output was around 1.6 million barrels before civil war broke out in February.

Aframax rates for 80,000-metric ton vessels loading at Libya are currently being quoted at WS 92.5, brokers said. The main shipping route for aframaxes from Libya is to Trieste, Italy, Libya’s biggest customer.

-By Neena Rai, Dow Jones Newswires

Image courtesy Maersk

By Flemming Emil Hansen, Dow Jones & Co

COPENHAGEN—Shipping and oil company A.P. Moller-Maersk A/S warned Wednesday that new shipping capacity and deteriorating world economic prospects are pressuring freight rates, and it’s unclear when they’ll recover.

The Danish company issued a more cautious forecast for the full year, after reporting a 5.8% decline in first-half net profit. Maersk, which operates the world’s largest container shipping firm, Maersk Line, didn’t include any freight-rate improvement for the second half in its adjusted full-year forecast, Maersk Chief Executive Nils Smedegaard Andersen said.

“Our competitors are very nervous,” Mr. Smedegaard Andersen said. “They’ve bought a lot of new ships at a time where it was expensive, and now they are nervous that they won’t be able to fill them. That means they are very aggressive with their pricing on the Asia-Europe and Asia-U.S. routes.”

The weakening global economy, exacerbated by sovereign-debt problems in Europe and the U.S., has added to the pressure on rates as shippers worry over demand, Mr. Smedegaard Andersen said. He played down the likelihood of a direct effect on Maersk’s trading volumes, however.

“There’s no doubt that the weak economic development makes shippers more nervous and adds to the price competition,” the CEO said. “But generally speaking, we don’t see any signs currently that the weaker economy and the financial crisis influence the trading volumes.”

Data from the Organization for Economic Cooperation and Development, or OECD, last week indicated that most of the world’s largest economies are heading for a period of slower growth, and that it’s increasingly likely that the U.S.—a key driver of global trade—will share that fate.

Mr. Smedegaard Andersen said Maersk is closely monitoring the situation and its impact on trade. Maersk doesn’t see freight rates falling further, he said, but they’re already in the doldrums.

“We haven’t seen a further rates decline in the past few months, but the rates are simply at a level where the industry can’t make any money,” Mr. Smedegaard Andersen said.

Maersk still anticipates 6% to 8% growth in 2011 shipping volumes, which Mr. Smedegaard Andersen said he hopes will lend some support to freight rates.

But the latest reading of dry bulk commodities shipping costs, expressed by the Baltic Dry Index, shows rates have fallen by almost 30% so far this year. Market participants expect freight rates to slide even further as an oversupply of vessels and economic concerns take their toll.

Among others, the Baltic and International Maritime Council, or BIMCO, shipping association has said it expects depressed freight rates over the coming months.

“Summer has been slow, so freight rates are likely to bottom out now, but only a little upside is visible for owners,” BIMCO analyst Peter Sands said.

Global ratings company Moody’s also dealt a blow to the shipping industry earlier this month when it downgraded the industry to negative status for the next 12 to 18 months.

Dry-bulk ships make up about 46% of the shipping industry’s tonnage. About 80% of dry-bulk vessels on shipbuilders’ order books will be built and delivered over the next two years. That tilts the dry-bulk shipping market toward excess supply, which will continue to depress freight rates, Moody’s said.

Considering the tough shipping environment, Mr. Smedegaard Andersen said, Maersk’s first-half results were satisfactory.

First-half net profit fell to 12.61 billion kroner ($2.32 billion), from 13.40 billion kroner, short of analysts’ forecasts.

Earnings before interest and tax, or Ebit, rose 13% to 34.60 billion kroner, from 30.52 billion kroner in the same period a year earlier, topping analysts’ expectations.

Sales rose 4% in the six months to 159.23 billion kroner, from 153.53 billion kroner, helped by higher oil prices for its oil production business.

Neena Rai and Paul Hannon in London contributed to this article.

The freight rate for a 75,000-metric-ton LR-2 cargo from the Middle East to Japan was last assessed Monday at Worldscale 128.21, its highest since mid-May, compared with W119.88 a week ago.

The rate for a 55,000-ton LR-1 cargo for the same route surged to W128.50, a level not seen since mid-June, from W124.81, the Baltic Exchange said.

The rates may continue to rise as booking of August-loading cargoes enters full gear, with Taiwanese naphtha demand recovering after recent cracker outages, shipbrokers said.

Also, the rate for a 30,000-ton tanker from Singapore to Japan edged up to W147.43 from W146.86 despite a fall in gasoline shipments from Taiwan and China. Brokers said the drop didn’t have much impact on this route.

The rate for a 260,000-ton Very Large Crude Carrier from the Middle East to Japan fell slightly to W49.71 Monday from W50.26 a week ago, underperforming market expectations.

Data from Meiwa International showed a slow pace of chartering, with only 33 cargoes fixed to be loaded in August so far.

“The market has been disappointing…but further looking, owners may not be willing to accept lower rates because of high bunker prices,” a North Asian broker said.

The rate for a VLCC from West Africa to China weakened to W47.50 from W47.67, as the 80,000-ton Aframax rate from Southeast Asia to the east coast of Australia softened to W97.17 from W97.33.

-By Max Lin, Dow Jones Newswires

SINGAPORE (Dow Jones)–The Asia crude tanker market is slowing, with increased vessel availability from mid-July, but healthy gasoline and gasoil demand from South Asia may support vessels carrying clean petroleum products.

The freight rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Monday at a three-week low of Worldscale 52.82, or $9,023 a day, down 6.35 points from a week earlier, according to Baltic Exchange data.

The market has turned bearish, ending a stretch of gains that had lasted nearly a month, with the supply of vessels appearing to outstrip demand.

The International Energy Agency’s reserve release program is also weighing on the market, as members South Korea and Japan will make at least 5.956 million barrels of crude available to domestic refiners, which may reduce their need for chartering.

“The fixing dates seemed to have moved to mid-month onwards, and there are still plenty ships, so we could see weaker rates,” broker Simpson Spencer & Young said in a research note.

Data from Meiwa International showed that 47 cargoes have been fixed to be lifted in July so far, and it remains to be seen whether the number of fixtures can reach the peak level of 122 lots this month.

The rate for a VLCC from West Africa to China fell from W52.77 to W49.10, as the 80,000-ton Aframax rate from Southeast Asia to the east coast of Australia inched up to W96.94 from W96.39.

Freight rates for clean products such as naphtha, gasoil and gasoline are on the rise, as bookings of cargoes for loading next month start in earnest. The rate for a 75,000-ton LR-2 cargo from the Middle East to Japan jumped to W118.75 from W106.04, while a 55,000-ton LR-1 cargo for the same route rose from W123.69 to W126.42.

The rate for a 30,000-ton tanker from Singapore to Japan dropped from W151.21 to W146.64, though healthy demand for products from India and Pakistan may provide support later.

-By Max Lin, Dow Jones Newswires