Oil Tanker Freight Rates At 1-Month High

Image courtesy Frontline

LONDON (Dow Jones)–Very Large Crude Carrier shipping rates on the benchmark Middle East to Japan route (Ras Tanura/Chiba) settled at a one-month high Tuesday due to higher cargo bookings, but vessel oversupply will limit any significant gains, Richard Arnesen, Global Head of Tankers at Oslo-based Spectron Energy Services, said Wednesday.

On Aug. 23, VLCC rates on the Middle East to Japan route, or TD3, settled at a one-month high of $2,659/ton (average earnings) or W47.50 in the Worldscale measurement of shipping rates.

Worldscale is a methodology used to establish payment of freight rates for an oil tanker’s cargo. In negotiating a price to pay, the rate is referred to as WS100, or 100% of Worldscale.

“The charterers had been a bit slow to work their cargoes into the market and all of sudden we saw more cargoes being worked at the same time. So now the owners are trying to get the rates up a little bit, but there are still too many ships around for any major change in rates,” Arnesen said.

With opposition forces now in control of much of Libya’s oil fields, refineries and export terminals, Libyan crude could start returning to world markets, which could boost aframax Med rates, Arnesen said. “There will be cargoes leaving from Libya which can only help.”

Libyan output was around 1.6 million barrels before civil war broke out in February.

Aframax rates for 80,000-metric ton vessels loading at Libya are currently being quoted at WS 92.5, brokers said. The main shipping route for aframaxes from Libya is to Trieste, Italy, Libya’s biggest customer.

-By Neena Rai, Dow Jones Newswires