High supertanker demand fails to stem supply growth

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

31 May 2010

The highest monthly demand for supertankers in more than two years failed to curtail an expansion in the number of vessels seeking cargoes in the Middle East, the world’s largest export region for crude oil. There are 19 percent more very large crude carriers, or VLCCs for hire in the Persian Gulf over the next 30 days than there are cargoes that need shipping, according to the median estimate of five shipbrokers and one owner surveyed by Bloomberg New. A week ago, the excess was 12 percent.
“May was the busiest month since April 2008 for the number of liftings reported,” London-based shipbroker Galbraith’s Ltd. said in a report late May 21, referring to cargo loadings. Supply swelled because
Asian refineries performing routine yearly maintenance offered ships for hire that they don’t need themselves, it said.
Charter rates fell for a fourth straight week last week, declining 1.5 percent to 70.32 Worldscale points on the industry benchmark Saudi Arabia-to-Japan route. Income from the route climbed 5.4 percent to $31,846 a day following the biggest weekly drop in fuel costs since July.
The global price of ship fuel at 25 ports worldwide fell 7.7 percent to $432 a metric ton last week, according to data compiled by Bloomberg. That was the biggest decline since the week ended July 10. Ship fuel represents the largest running cost for most owners and prices normally track crude oil.
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 US 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.

Source: Alaric Nightingale, Bloomberg