VLCC mayfair

Firmer Bookings Lift Mideast Crude Tanker Rates

Reuters
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October 29, 2013

reuters logoBy Jonathan Saul

LONDON, Oct 29 (Reuters) – Crude oil tanker earnings on the major Middle East route were firmer on Tuesday helped by recent healthy booking levels.

The world’s benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W43.22 in the worldscale measure of freight rates, or $17,402 a day when translated into average earnings.

That compared with W43.22 or $17,363 a day on Monday and W41.60 or $13,893 a day last Tuesday. Earnings this week have touched their highest level since mid-July.

“A steady flow of cargoes in the MEG has allowed owners to gradually nudge rates higher, but the lack of a sudden rush of fixings has prevented a more rapid escalation,” broker SSY said.

Operating costs were estimated around $10,000 to $11,000 a day for VLCCs.

“So far for November there have been made 85 fixtures, which is the highest/fastest pace seen for any month this far. Expect rates to remain relatively stable for now,” Pareto Securities.

In July earnings rose to their highest in over seven months, lifted by stronger demand and unrest in Egypt.

VLCC rates from the Gulf to the United States were at W27.63 on Tuesday versus W27.83 on Monday and W28.15 last Tuesday.

Cross-Mediterranean aframax tanker rates were at W73.15, or $1,837 a day, compared with W75.50 or $3,119 on Monday and W78.25 or $4,628 a day last Tuesday.

Brokers said growing oil export disruptions in Libya were hitting aframax activity in the Med.

Rates for suezmax tankers on the Black Sea to Med route reached W60.00, or $5,074 a day. That compared with W60.88, or $5,796 a day on Monday and W56.50 or $1,614 a day last Tuesday.

Brokers said the positive momentum in the VLCC market had supported rate sentiment for suezmaxes.

“The crude tanker market has surged with suezmaxes fast picking up the slack to VLCCs,” said Arctic Securities analyst Erik Nikolai Stavseth.

Seasonal effects are contributing to a stronger market, but we do think the market may take a breather short-term.”

Traders said the market would remain choppy in the coming months as more tankers, ordered when times were good, join the global fleet this year. Tanker owners have also faced higher fuel costs, which have eaten into earnings.

Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees. VLCC operating costs, including financial costs, are estimated at around $10,000 a day. (Reporting by Jonathan Saul; editing by David Evans)

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