Oct. 6 (Bloomberg) -- The cost of transporting oil aboard supertankers may fall by year-end as OPEC members reduce production, leaving a glut of vessels.

Shipowners will earn about $80,300 a day this quarter on the benchmark 40-day round-trip between the Middle East and Japan, according to the median estimate of nine analysts surveyed by Bloomberg. That compares with $95,000 last year and about $82,500 in the third quarter.

``We are going to see a much-subdued market,'' said Finn Engelsen, managing director of Oslo-based consultant Lorentzen & Stemoco A/S, who forecasts the rate will drop as low as $40,000 a day. ``It's not written in any book that it will be a strong fourth quarter.''

Falling freight rates mean lower earnings for companies that operate tankers, the ships that carry about 44 percent of the world's oil. Profits at Frontline Ltd., the biggest tanker company by capacity, declined for five straight quarters as rates slid because of a surge in shipbuilding.

Oil has slumped 22 percent from its July record after U.S. refiners were left with a surplus of crude. A mild hurricane season and easing tensions over Iran's nuclear program contributed to oil's decline.

Falling oil prices prompted production cuts. A majority of members of the Organization of Petroleum Exporting Countries support reducing output by 1 million barrels a day, or 3.6 percent, Algeria's state news agency reported yesterday. Nigeria and Venezuela said last week they will cut output by a combined 170,000 barrels a day.

`A Risk'

``There's a risk for a weakening'' of tanker rates, said Erik Andersen, managing director of research at R.S. Platou Shipbrokers AS in Oslo. ``We are very uncertain about the next few months simply because oil market volatility has been so strong. It's been driven by geopolitical factors, and those seem to be easing.''

Shares of Hamilton, Bermuda-based Frontline have fallen 5.4 percent this year. The stock fell 1.5 kroner, or 0.6 percent, to 238.25 kroner in Oslo today, valuing the company at 17.8 billion kroner ($2.6 billion).

Freight rates for very large crude carriers, or VLCCs, may be further hampered by growth in the number of smaller vessels such as aframaxes, said Vivek Srivastava, an analyst at shipping forecaster Maritime Strategies International Ltd. in London. Aframaxes haul 650,000 barrels of oil, compared with at least 2 million barrels on a supertanker.

The number of ``aframaxes is going to expand 10 percent this year after an 11 percent increase last year, and that dilutes the fleet,'' Srivastava said. ``The overall direction is determined by the overall fleet.''

New Ships

Frontline Ltd. made $73,000 a day in the first quarter for each of its 2 million-barrel oil tankers and $50,600 in the second. Supertankers earned $82,445 for benchmark shipments between the Middle East and Japan, more than double the year-ago period, according to London-based shipbroker Galbraith's Ltd.

A glut of supertankers in October may weigh on rates in November. About 100 oil tankers are available for hire in the Persian Gulf, compared with ``35 to 40'' outstanding cargoes, according to Paris-based shipbroker Barry Rogliano Salles.

Rates may be hurt by the introduction of 10 VLCCs in the fourth quarter, boosting the global fleet by 2.1 percent to 486 vessels, Drewry Shipping Consultants Ltd. said in a Sept. 18 report.

Storing Oil

U.S. crude stocks are 11.6 percent above the five-year average for this time of year, the Energy Department said Sept. 27, mainly because refineries bought oil to cover themselves against hurricanes that didn't happen. Hurricanes Katrina and Rita in 2005 stopped about 1 million barrels a day of production in the U.S., forcing U.S. oil companies to bolster imports from the Middle East.

While the supply of vessels and OPEC cuts may cause freight rates to fall, oil demand will continue to bolster the amount shipowners can charge. Refineries will want 86.3 million barrels a day in the final quarter, an increase of 2.6 percent from the year-ago period, according a Sept. 12 report by the Paris-based International Energy Agency. The agency doesn't provide fourth- quarter supply forecasts.

A further boon for owners may be an increasing requirement for tankers to store, rather than ship, crude oil, because prices on futures markets are high enough for traders to buy now and sell later, Andersen of Platou said.

Storing for Longer

The rising future price of oil allowed one company to store crude on an oil tanker at a cost of $77,000 a day and sell it a month later at a profit, Andersen said. He didn't provide details of the transaction.

Oil companies may also store crude to limit tax bills. Refineries in Europe and the U.S. try to keep their on-land oil inventory to a minimum at year-end because they are taken into account in tax calculations, said Olivier Jakob, managing director at Petromatrix GmbH in Oberwil, Switzerland. The consultant correctly called a crude oil rally to $75 a barrel this year and also a subsequent decline from $77 a barrel.

``It's definitely a consideration,'' he said. ``You get some drawing down of stocks and pure end-of-year plays with delayed shipments, and selling of oil to re-buy it later. That's a definite phenomenon in the U.S. and Europe.''

As oil companies put off arrivals, it may result in some of the oil being stored on tankers for longer periods, reducing the supply of vessels.

Individual Voyages

The $40,447 assessment assumes the Worldscale Association, a non-profit organization that assesses voyage costs, won't alter flat rates for individual voyages. The past two years have seen increases of between 5 and 12 percent.

Imarex provides prices and brokerage for so-called Forward Freight Agreements, or FFAs, and ship fuel prices. FFAs are contracts that allow shippers to hedge, or bet, on future volatility in freight rates.

An additional 32 VLCCs, or 6.7 percent of the present fleet, will enter service next year, according to Drewry Shipping Consultants, while oil demand growth is forecast to rise 1.8 percent to 86.2 million barrels a day by the International Energy Agency.

Frontline said on Aug. 22 that it needs $28,252 a day to break even on each of its VLCCs.

Oil Movements, a Halifax, England-based consultant, says 37 million barrels of oil are shipped by sea each day. That compares with total production of 85 million barrels a day, according to the International Energy Agency.

To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net.

Last Updated: October 6, 2006 12:52 EDT