Persian Gulf Tanker Supply Seen at Record by Morgan Stanley

A record supply of very large crude carriers will be available in the Persian Gulf over the next 30 days, according to Morgan Stanley. (MS)

More than 25 percent of the global fleet, or 159 ships each able to hold 2 million barrels of crude, will be available for loading during the period, Fotis Giannakoulis, a New York-based analyst at Morgan Stanley, said in an e-mailed report today. The Persian Gulf remains “heavily” oversupplied, keeping VLCC rates at $5,000 a day as vessel availability climbs to a record, he said.

VLCCs “are still stuck in a rut with quoted rates in negative territory in what should be the last part of a strong season,” according to an e-mailed report today from Oslo-based Arctic Securities ASA. This is “giving a worrying outlook for the summer months,” according to the report.

Daily losses for VLCCs hauling Middle East crude to Asia as determined by the London-based Baltic Exchange, a global benchmark, widened to $3,514 from $3,082 on March 1. The ships lost $5,072 a day last month on average, exchange data show.

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, fell 0.7 percent to $629.26 a metric ton, figures compiled by Bloomberg from 25 ports showed.

Demand Growth

The combined carrying capacity of the world VLCC fleet will expand 5.1 percent this year, similar to demand growth of 5.2 percent, according to Clarkson Plc (CKN), the biggest shipbroker.

Charter rates for VLCCs on the Saudi Arabia-to-Japan voyage added 0.2 percent to 32.36 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. 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 32.36 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, lost 0.6 percent to 696, according to the bourse.

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