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ASIA TANKER: Oversupply is consistently the issue with the VLCC market

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September 28, 2011

SINGAPORE (Dow Jones)–Asia’s petroleum tanker markets will likely stay anemic due to persistent oversupply, though falling bunker prices could support charterers’ bottom lines.

With China’s weeklong National Day holidays coming up next week, conditions are unlikely to improve given that many players will be out of the market, shipbrokers said.

The spot rate for a 260,000-metric-ton Very Large Crude Carrier from the Middle East to Japan was assessed Monday at Worldscale 44.96, down from the week-earlier level of W45.26, according to the Baltic Exchange.

However, due to collapsing bunker prices, cash returns for owners were assessed $378 stronger at minus $1,826.

“It has been at the bottom for about almost two months. Looking at the current market, surplus tonnage will continue so I don’t see any kind of upside,” a Japanese broker said.

Although the fixing of October-loading cargoes is in full swing, rates continue to be depressed due to high availability of vessels, broker Simpson, Spence & Young said in a research note.

Broker Meiwa International said in a note that one week into fixing of vessels for October, 36 cargoes are already set to be lifted. This compares with 95 lots for the whole of October in 2010.

The rate for a VLCC from West Africa to China edged up to W42.87 from W42.57, while the 80,000-ton Aframax rate from Southeast Asia to the east coast of Australia also rose slightly, to W91.22 from W92.11.

Freight rates for vessels carrying clean petroleum products have also fallen to their lowest levels in around two months, as naphtha demand remains slow, with end users hesitant to buy spot cargoes because of signs of a softening global economy.

“There is just not enough demand…for this week at least, I think rates will still be weak,” a Singapore-based broker said.

The rate for a 55,000-ton LR-1 cargo from the Middle East to Japan dropped to W128.38 Monday from W133.08 a week ago, while the rate for a 75,000-ton LR-2 cargo for the same route eased to W120.96 from W122.29.

The rate for a 30,000-ton tanker from Singapore to Japan slipped to W152.71 from W152.86.

-By Max Lin, Dow Jones Newswires

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