Oil-Tanker Hire Costs Advance as Asia-Bound Charters Continue

Hire costs for the largest oil tankers rose for a second session as more ships were booked to haul cargoes of Middle East crude to Asia, the industry’s busiest trade route.

Charter rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage increased 0.5 percent to 31.23 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed. That was only the second gain since Jan. 11. Four VLCCs were hired, according to figures from Marex Spectron Group.

Charters were sufficient to buoy hire rates for VLCCs, even as the supply of tankers available in the Middle East over the next 30 days widened by three ships to 101, Marex Spectron said today. A dearth of cargoes curbed bookings over the last two weeks, weighing on hire rates, according to the consulting unit of Oslo-based shipping-services and investment-banking company Astrup Fearnley.

There is a “huge surplus of tonnage created by fewer cargoes recorded overall so far for February dates,” Fearnley Consultants said in a report.

Daily losses for VLCCs on the benchmark voyage widened to $5,199 from $5,189 yesterday, exchange data showed. The ships, each able to hold 2 million barrels of crude, earned money in only four sessions in the third quarter on the journey.

Slow-Steaming

The exchange’s assessments fail to account for owners’ efforts to improve returns by securing cargoes for a voyage’s return leg or reducing speed to burn less fuel, known as slow- steaming. The price of fuel, or bunkers, the industry’s main expense, increased 1.6 percent, the most in six months, to $638.01 a metric ton, figures compiled by Bloomberg from 25 ports showed.

The combined carrying capacity of the world VLCC fleet will expand 5.3 percent this year, below demand growth of 5.9 percent, according to Clarkson Plc, the biggest shipbroker.

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 31.23 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, was unchanged at 636, 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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