By Jonathan Saul
LONDON (Reuters) – Crude oil tanker earnings on the major Middle East route slid to their lowest in six months on Monday as the market continued to struggle with slow demand and a glut of vessels.
The world’s benchmark VLCC export TD3 route from the Middle East Gulf to Japan reached W31.29 in the worldscale measure of freight rates, or -$7,038 a day when translated into average earnings – their lowest since the end of August last year.
That compared with W31.19 or -$6,761 a day on Friday and W31.89 or -$5,009 a day last Monday.
“VLCC availability in the (Middle East Gulf) AG continues at unprecedented levels and we would need to see an uptick in demand for rates to increase from sub-opex levels currently,” Pareto Securities said on Monday.
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.
They have posted negative earnings for 13 sessions in a row – the first negative stretch since November.
“The near-term outlook appears grim, with high U.S. inventories implying a slowdown in westbound demand and the ongoing holidays likely leading to slow cargo requirements for eastbound ships,” Global Hunter Securities said referring to lunar new year holidays in Asia.
In late November, earnings jumped to their highest in nearly six months, helped by firmer fixture activity.
VLCC average earnings turned negative for the first time in August 2011 since the Baltic Exchange started collating the data in 2008 as worsening conditions took their toll.
VLCC rates from the Gulf to the United States were at W18.09 on Monday versus W18.05 on Friday and W18.41 last Monday.
Rates for suezmax tankers on the Black Sea to Med route reached W58.00 or $3,070 a day, from W58.42 or $3,468 a day on Friday and W59.75 or $4,608 a day last Monday.
“The Black Sea/Mediterranean (suezmax) markets were similarly quiet. This and ample tonnage made sure that moderate delays in both directions through the Bosphorus and at Algerian ports had little or no impact,” broker SSY said.
Cross-Mediterranean aframax tanker rates were at W85.55 or $7,795 a day on Monday, compared with W88.07 or $9,311 on Friday and W100.00 or $16,298 a day last Monday.
Brokers said slower activity had hurt rate sentiment.
Tanker players said downside risks remained, given problems facing the global economy and the fact that more tankers, ordered when times were good, were still to join the global fleet this year.
“Another tough year is on the horizon for tanker owners as the market continues to struggle under the pressure of overcapacity. Global oil consumption only managed a timid growth in the fourth quarter of 2012, with global crude oil loadings increasing by 0.6 percent,” consultants Drewry said on Monday. (Reporting by Jonathan Saul, editing by William Hardy)
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