Middle East Oil-Tanker Losses Widen as Ship Bookings Decline

Losses widened for the biggest oil tankers plying the industry’s busiest trade route as the number of vessels booked to haul Middle East crude to Asia declined.

Very large crude carriers are losing $5,252 a day on the benchmark Saudi Arabia-to-Japan voyage, figures from the London- based Baltic Exchange showed. That compared with a loss of $3,468 yesterday and earnings of $17,771 as of last year’s final session.

VLCCs earned money in only four sessions in the third quarter on the benchmark journey, bourse data showed. About 104 of the biggest tankers are expected to enter the Gulf over the next four weeks, Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group, said in an e-mailed report. That’s seven more than yesterday, Sy said.

“Only 14 carriers have been reported fixed out of the Gulf through Thursday, compared to about 30 in each of the past two weeks,” Sam Margolin, an analyst at Dahlman Rose & Co. in New York, said in an e-mailed report today. Earnings for single- journey or spot voyages slumped to $11,300 a day from $24,300 a day a week earlier, Margolin said.

Charter rates for VLCCs on the benchmark voyage slid 3.3 percent to 30.98 Worldscale points, more than 27 percent below the start of the year, the exchange’s figures showed. The decline was the 10th in a row. Each of the ships can hold 2 million barrels of crude.

The exchange’s earnings assessments fail to account for owners’ efforts to improve returns by securing cargoes for a voyage’s return leg or by reducing speed to burn less fuel, known as slow-steaming. The price of fuel, or bunkers, the industry’s biggest expense, lost 0.3 percent to $626.33 a metric ton, figures compiled by Bloomberg from 25 ports showed.

VLCC Earnings

Average monthly earnings for VLCCs are on course for the lowest level since October, according to estimates from Clarkson Research Services Ltd., a unit of the largest global shipbroker. Still, the combined carrying capacity of the world fleet will expand 5.3 percent this year, below demand growth of 6.3 percent, Clarkson data 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 30.98 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, declined 0.2 percent to 646, 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

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