VLCC Charter Rates Slide

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June 7, 2013

(Bloomberg) Charter rates for the largest oil tankers hauling Middle East crude to Asia slid the most since January this week as the supply of cargoes declined.

Hire costs for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage lost 0.4 percent to 42.28 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. That rounded out a 9.4 percent weekly decrease, the biggest since the week ended Jan. 25, the data show. Each of the ships can hold 2 million barrels of crude.

A “couple more” cargoes became available for loading in the Persian Gulf in June amid “dull activity,” Marex Spectron Group said in an e-mailed report. Charterers are waiting for freight rates to fall before booking more ships, according to London-based shipbroker Braemar Seascope Ltd. Hire costs jumped 40 percent last month.

“Rather than the continued stampede of cargoes of the previous weeks, charterers held back and relaxed,” Braemar said in a report. Charterers “replaced late-running ships fixed under duress last week and tried to wrest control back from the shipowners.”

Daily earnings for VLCCs on the benchmark voyage added 3.3 percent to $16,491, this week’s first increase, according to the exchange. Its assessments don’t account for owners’ efforts to improve returns by securing cargoes for return-leg voyages or reducing speed to burn less fuel, the industry’s main expense.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 42.28 percent of the nominal Worldscale rate for that voyage.

The biggest one-day change for ships hauling crude was for tankers heading to the U.S. Gulf Coast from the Caribbean, which fell 2.6 percent to 109.77 Worldscale points. For vessels shipping refined fuels, the largest move was for tankers heading to Japan from Saudi Arabia, which climbed 1.9 percent to 98.92 points, according to the exchange.

By Rob Sheridan (c) 2013 Bloomberg

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