Oil-Tanker Losses Persist on Declining Middle East Crude Exports

Losses for the biggest oil tankers hauling Middle East crude to Asia, the industry’s benchmark route, persisted amid declines in export cargoes.

Very large crude carriers on the Saudi Arabia-to-Japan voyage are losing $6,083 daily, figures from the Baltic Exchange in London showed today, less than $6,383 on Aug. 17. The vessels, each able to haul 2 million barrels of oil, were earning $41,093 a day at this year’s high in April.

Seaborne oil trade growth is expected to remain “weak” during the next 18 months, according to an e-mailed report from Oslo-based RS Platou Markets AS. VLCC returns reached the lowest level in at least four years on July 23. The VLCC fleet is poised to expand by 6.9 percent this year, exceeding 4.7 percent demand growth, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

“Activity levels have been lower with reduced Middle East output in July and August, partly due to lower Iranian exports,” RS Platou said in the report. VLCC rates are “still low,” it said.

The exchange’s assessments don’t reflect speed cuts aimed at reducing fuel costs, vessel owners’ largest expense. They can boost returns by slowing ships on return journeys after unloading cargoes. The price of ship fuel, or bunkers, fell 0.1 percent to $662.69 a metric ton, according to data compiled by Bloomberg.

Charter costs for VLCCs on the benchmark voyage rose 0.3 percent to 36.41 industry-standard Worldscale points, exchange figures showed.

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 36.41 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs climbed 0.3 percent to 610, the highest since Aug. 10, according to the exchange.

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net