Four-Mile-Long Line of Supertankers in Iraq Helps Fuel Rate Surge

By Bill Lehane

(Bloomberg) — Iraq’s biggest oil exports in more than three decades and winter winds are helping to keep shipping rates at a six-year high as a four-mile line of supertankers waits to load the nation’s crude.

There are 22 of the industry’s biggest tankers, or almost 5 percent of the fleet, waiting to collect cargoes from the Basra Oil Terminal in the Persian Gulf, from where most of Iraq’s crude is shipped. The daily rate for supertankers transporting crude from the Middle East to Japan rose to $51,042 on Thursday, bringing the average for this year to $61,306, data from the Baltic Exchange in London show.

Iraq’s oil output is rising faster than any other nation in OPEC as supplies from its southern oil province expand even as Islamic State fighters seize parts of the north. Tankers leaving Basra in the past week waited an average of 16 days, ship tracking data compiled by Bloomberg show. That compares with about 10 days normally, said Odysseus Valatsas, chartering manager at Dynacom Tankers Management in Glyfada, Greece.

“The fact is it will definitely affect the market,” Valatsas, whose company’s biggest tankers can transport about 28 million barrels of crude, said by phone Thursday. “The more ships that are missing in the market, the higher the chance the market has to go up.”

Iraq’s crude exports jumped 15 percent last month to 2.98 million barrels a day, the highest in 35 years, Oil Ministry spokesman Asim Jihad said by phone from Baghdad on Wednesday. The nation pumped 3.7 million barrels a day in March, the most since at least 1962, according to data compiled by Bloomberg.

Extraordinary Efforts

Iraq will increase its crude production capacity to 4.7 million barrels a day in 2020, from 3.7 million last year, the International Energy Agency said in a report on Feb. 10.

Shipments from Basra are sometimes slowed by strong winds during the first three months of the year. Iraq made “extraordinary efforts to boost crude oil exports to compensate for the delays in loading of tankers due to bad weather,” Jihad said.

The buildup of tankers is probably positive for the shipping rates because it means vessels that would otherwise be competing for cargoes are having to wait for loadings instead, Jonathan Chappell, an analyst at Evercore ISI in New York, said by phone Wednesday. The VLCC fleet’s current utilization rate is almost 90 percent, he estimates.

The 22 supertankers located near Basra in data compiled by Bloomberg on Wednesday would stretch for about 7,300 meters, or 4.5 miles, lined end to end. Each of the vessels, known in the industry as very large crude carriers, can load about 2 million barrels. There are also 11 smaller Suezmax ships waiting.

“That’s a high number from historical levels in waiting times and in loading times and I’m sure that’s having a positive effect on the market,” Chappell said.

–With assistance from Khalid Al-Ansary and Kadhim Ajrash in Baghdad and Angelina Rascouet and Grant Smith in London.

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