Oil-Tanker Returns Seen Down Most Since 2008 on Demand Slump

Earnings for the largest oil tankers fell the most since 2008 last week amid slowing demand to charter the vessels, said Clarkson Research Services Ltd.

Daily returns for very large crude carriers slumped 43 percent to $14,090, according to figures on the website of Clarkson, a unit of the world’s largest shipbroker. The drop was the biggest since Aug. 22, 2008, its data showed. Each of the tankers can haul 2 million barrels of oil.

Saudi Arabia, the world’s largest crude exporter, cut daily production by 300,000 barrels in December, Oslo-based investment bank RS Platou Markets AS said today in an e-mailed report that cited International Energy Agency data. VLCCs began losing money on the benchmark voyage to Asia from the Middle East on Jan. 24, assessments of returns by the Baltic Exchange in London showed.

“Chartering activity has the last week been reduced and brokers say the February loading program is behind the normal schedule,” Platou said. “This has led to more than 100 VLCCs available to load in the Middle East Gulf over the next month, the highest since October 2012.”

The exchange’s 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, rose 0.9 percent to $632.04 a metric ton, the highest level since Oct. 24, figures compiled by Bloomberg from 25 ports showed.

Spot Market

Daily earnings for single journeys, known as spot voyages, slumped to $9,600 from $23,600 a week earlier, Sam Margolin, an analyst at investment bank Dahlman Rose & Co. in New York, said in an e-mailed report today.

The combined carrying capacity of the world VLCC fleet will expand 5.3 percent this year, below demand growth of 6.3 percent, Clarkson data showed.

Daily losses for the tankers on the benchmark Saudi Arabia- to-Japan voyage widened to $6,443 from $5,252 on Jan. 25, data from the London-based Baltic Exchange showed. VLCCs earned money in only four sessions in the third quarter on the journey.

Charter rates for VLCCs on the route, at the lowest level since September 2009, slid 1.7 percent to 30.44 Worldscale points, the exchange’s figures showed. The decline was the 11th in a row.

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 30.44 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 1.4 percent to 637, according to the exchange. The retreat was the biggest since Jan. 4.

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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