LONDON (Dow Jones)–A growing number of oil tankers are dropping anchor rather than shipping crude to market as the rate of ship construction outpaces global oil demand, prompting concern about how many ship owners can further endure the slump in the tanker market.
The idled ships are further eroding ship owners’ earnings, even though rates paid to charter ships have already sunk to historically low levels.
The Baltic and International Maritime Council’s chief shipping analyst Peter Sand expects the global crude tanker fleet–which includes Very Large Crude Carriers, or VLCCs, which can carry up to 2 million barrels of crude oil–to grow by 9.1% in 2011. Oil demand growth is only forecast to grow 1.4% this year, according to the International Energy Agency.
“The period of time for which oil tankers are idled, without employment or waiting to take on a cargo is seen growing,” BIMCO’s Sand said. “So far, 42 VLCCs have already been delivered in 2011, with only six reported sold for recycling.”
Maersk Tankers, a major crude fleet operator with 178 tankers, said the extra vessels have pushed shipping rates to unsustainably low levels, prompting it to trim costs.
“Our company has been able to significantly cut costs through super-slow voyages of 10 knots, which has led to savings in fuel and CO2 savings,” Maersk Tankers’ Chief Commercial Officer Klaus Sejling said Wednesday.
Omar Nokta, managing director of maritime research at U.S. Investment Bank Dahlman Rose & Co., said tanker shipping rates remain even below cash operating costs for ship owners on several routes.
-By Neena Rai, Dow Jones Newswires