Persian Gulf Tanker Rates May Curb Drop as Owners Conserve Fuel

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Oct 2007

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may curb four days of declines as record fuel costs spurs owners to slow their ships to save money. Marine fuel oil, the biggest cost for shipowners, climbed to $491 a metric ton at Fujairah on Oct. 26, according to data compiled by Bloomberg. By traveling at an ''economical'' speed, owners can save about 20 tons, or $10,000, a day, Nikos Varvaropoulos, a tanker broker at Optima Shipbrokers in Athens, said in an e-mailed note today. Such carriers normally burn about 100 tons a day when going at full speed. ''A lot of owners with ships in the Far East or west are not hurrying to go back'' to the Middle East, Varvaropoulos said. When tankers sail at slower speeds, it takes them longer to be available again for rehire, reducing supply. Exxon Mobil Corp., the world's biggest publicly quoted oil company, hired the tanker Grand Atlantic at a rate of 51.5 Worldscale points, according to a report today from Paris-based shipbrokers Barry Rogliano Salles. That's 11 percent below the London-based Baltic Exchange's benchmark rate of 58 Worldscale points for voyages to Asia. Grand Atlantic probably cost less to hire than the benchmark because it's fitted with a single steel hull separating its cargo from the ocean. The exchange assessment also takes into account bookings for two-hulled tankers that cut the risk of an oil spill in the event of an accident. Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates. Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch. At 58 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $17,147 a day on a 38- day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices. Based on Fujairah marine fuel prices of Oct. 19, the same Worldscale rate would have earned $21,420 a day. Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $30,000 a day to break even on each of its supertankers. Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.