Tanker Outlook Cut at Wells Fargo as U.S. Oil Imports Slide

Crude-oil tankers will earn less than previously anticipated next year as Chinese demand fails to replace declining U.S. imports, according to Wells Fargo Securities LLC.

Rates for very large crude carriers will average $23,000 a day in 2013, down from last quarter’s estimate of $28,375, Michael Webber, an analyst at Wells Fargo in New York, said in an e-mailed report today. He also reduced forecasted earnings for Suezmax tankers hauling 1 million-barrel cargoes by 6.9 percent to $20,125 a day.

Imports may supply 42 percent of U.S. oil consumption this year, down from 60 percent in 2005, Webber said. The world’s largest crude buyer probably won’t return to 2007-08 levels, making tankers increasingly dependent on Asian demand, he said. While an increase in Chinese consumption is needed to improve the market, shipments to the nation are down 14 percent year-to- date, according to the report.

“The tanker market is clearly still moving along its trough, begging the question, when should we expect a meaningful improvement?” Webber said in the report. “The answer unfortunately seems to be ‘not soon.’”

VLCCs are losing $1,772 daily on the Saudi Arabia-to-Japan benchmark voyage, compared with the prior session’s loss of $2,009, according to the London-based Baltic Exchange today. Its assessments don’t reflect speed cuts aimed at curbing use of ship fuel, or bunkers, the industry’s biggest expense. Returns were positive in only four sessions so far in the second half.

Charter Costs

Charter costs for VLCCs hauling 2 million barrel cargoes of Middle East crude to Asia slipped 0.3 percent to 36.34 industry- standard Worldscale points, data from the bourse showed. That’s the lowest since Oct. 19.

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 36.34 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, gained 0.3 percent to 674, the first increase after four consecutive declines, according to the exchange.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

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

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