By Jonathan Saul
LONDON, Sept 10 (Reuters) – Crude oil tanker earnings on the major Middle East route stayed under pressure on Tuesday with a surplus of vessels weighing on rate sentiment.
Dealers said growing turmoil in the Middle East remained a factor, leading to lower tanker activity in the Med due to strikes by oil workers and armed guards in Libya, which has paralysed oil production there.
The world’s benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W32.88 in the worldscale measure of freight rates, or $579 a day when translated into average earnings.
That compared with W32.92 or $732 a day on Monday and W33.03 or $743 a day last Tuesday.
“The regional position list remains long and charterers have had little difficulty in securing tonnage to meet their requirements. As such, rate gains have been limited,” broker SSY said.
Arctic Securities analyst Erik Nikolai Stavseth said the number of VLCCs available for hire was at least 83 at the moment over the next four week period.
“The crude tanker market remains soft,” he said.
In July earnings rose to their highest in over seven months, lifted by stronger demand and the unrest in Egypt.
VLCC rates from the Gulf to the United States were at W22.46 on Tuesday versus W22.46 on Monday and W21.00 last Tuesday.
Cross-Mediterranean aframax tanker rates were at W70.00 or -$349 a day on Tuesday, compared with W70.10 or $17 on Monday and W74.63 or $2,829 a day last Tuesday.
Rates for suezmax tankers on the Black Sea to Med route reached W53.10 or -$1,3,49 a day. That compared with W52.79 or -$1,348 a day on Monday and W54,42 or $259 a day last Tuesday.
“The resultant drop in demand for aframaxes is an obvious threat to shipowners in the Mediterranean,” brokerage Poten & Partners said. “Requirements for aframaxes in the Mediterranean have already taken a hit.”
Consultants Maritime Strategies International (MSI) said separately in a report: “Syria aside as a clear geographical driver, Libya has been a key factor undermining suezmaz and aframax markets in the Med as well as supporting crude prices globally.”
Tanker players said downside risks remained, with the market still struggling with more tankers, ordered when times were good, still to join the global fleet this year. Tanker owners have also faced higher fuel costs, which have eaten into earnings.
“Overall, we should see some seasonal uplift across our forecast, with high crude prices and OPEC responses adding some room for upward volatility, but fundamentally the markets remain under heavy supply-side pressure,” MSI said.
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. (Editing by William Hardy)
(c) 2013 Thomson Reuters
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