Daily Earnings for VLCCs Drop as Charterers "Drip-Feed the Market"

Jan. 16 (Bloomberg) — Costs to ship Middle East oil to Asia, the tanker industry’s busiest trade route, fell for a third day as completion of cargo loadings scheduled for this month curbed demand for vessels.

Charter rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slipped 0.1 percent to 42.02 Worldscale points, data from the London-based Baltic Exchange showed today. That was the sixth retreat in seven.

Charterers are finishing loading January cargoes for the Middle East, the consulting unit of Oslo-based shipping-services and investment-banking company Astrup Fearnley said in an e-mailed note. As many as six cargoes were available today for loading in “very early February” in the Persian Gulf, said Odysseas Valatsas, chartering manager for Athens-based Dynacom Tankers Management Ltd., Greece’s second-largest VLCC operator.

“Charterers are slowly starting to drift into February, drip-feeding the market, keeping rates under their control,” Fearnley said. January cargoes totaled 122, it said, “much to owners’ disappointment.”

The combined carrying capacity of the world’s VLCCs will expand 5.3 percent this year, below demand growth of 6.3 percent, according to estimates from Clarkson Research Services Ltd., a unit of the largest global shipbroker. Each of the tankers can hold 2 million barrels of crude.

32% Plunge

Daily earnings for VLCCs on the benchmark route rose for the first time since Dec. 19, gaining 0.4 percent to $13,108, according to the exchange. Returns slid 32 percent during the streak of declines.

The exchange’s assessments don’t reflect speed cuts aimed at curbing use of ship fuel, or bunkers, the industry’s biggest expense. The price of fuel slipped 0.4 percent to $623.15 a metric ton, the lowest level since Jan. 7, according to figures compiled by Bloomberg from 25 ports.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 42.02 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, declined for a 14th session to 631, according to the exchange. That matched a run of drops through June 7.