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Oil-Tanker Costs Resume Decline on Ship Glut and Lower Output

Charter costs for the biggest tankers hauling Middle East oil to Asia resumed a decline as demand slowed further amid a surplus of ships and weakening crude production.

Booking rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage fell 0.2 percent to 30.70 industry-standard Worldscale points, staying at the lowest since Jan. 29, figures from the London-based Baltic Exchange showed. Costs were unchanged yesterday after sliding for 11 sessions. Each VLCC can hold 2 million barrels of oil.

There are 86 tankers available in the Persian Gulf over the next 30 days and 45 that can load until the end of April, Marex Spectron Group said in an e-mailed report. Oil production by the 12 members of the Organization of Petroleum Exporting Countries fell by 140,000 barrels a day last month from February, the International Energy Agency said today in a report.

“There are still a lot of ships available, so expect rates to remain where they currently are,” Kevin Sy, a Singapore- based freight-derivatives broker at Marex Spectron, said in the report. “The pace this week is still not picking up to match last week’s pace.”

Daily losses for VLCCs on the benchmark voyage as determined by the exchange widened to $4,998 from $4,885 yesterday. The ships lost money on the journey for seven weeks through March 14, according to its assessments, which don’t account for owners’ efforts to improve returns by securing cargoes for return voyages or reducing speed to burn less fuel.

Highest in a Week

The price of fuel, or bunkers, the industry’s main expense, rose 0.2 percent to a one-week high of $618.94 a metric ton today, figures compiled by Bloomberg from 25 ports 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 30.70 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 2.8 percent to 682, according to the exchange. The drop was the biggest since Jan. 2.

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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