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Oil-Tanker Surplus Seen at Highest in Two Years in Broker Survey

A glut of the largest oil tankers seeking cargoes in the Persian Gulf touched a two-year high, a Bloomberg News survey showed.

There are 20 percent more very large crude carriers for hire over the next 30 days than there are likely cargoes, the median estimate in a survey of six shipbrokers and owners today showed. That’s the highest level for this time of year since 2011, according to figures compiled by Bloomberg, and unchanged from last week’s corresponding survey.

Charter costs for VLCCs on the industry’s benchmark Saudi Arabia-to-Japan voyage are within about 5 percent of the lowest level since September 2009, reached in January, figures compiled by Bloomberg show. The ships lost money on the journey for seven weeks through March 14 and returns became negative again on March 28, according to the Baltic Exchange in London.

“Slowing fleet growth alone is insufficient to return the sector to profitability, given the current state of oversupply in the crude oil-tanker market and the fact that crude oil- tanker demand growth remains flat at best,” Doug Mavrinac, an analyst at Jefferies & Co. in Houston, said in an e-mailed report yesterday. The tanker market will stay “weak” through next year, the investment bank said.

VLCCs are losing $714 daily on the benchmark route, the exchange’s figures show, compared with earnings of about $16,500 at the start of the year. Each of the ships can hold 2 million barrels of oil.

The VLCC fleet’s total carrying capacity will rise 5.1 percent this year, above demand growth of 4.9 percent, according to Clarkson Plc, the biggest shipbroker.

The exchange’s assessments don’t reflect speed cuts aimed at reducing fuel costs, the main expense for owners, who can slow tankers on return journeys after unloading cargoes to boost returns. The price of fuel, or bunkers, slid 1.4 percent to $599.88 a metric ton yesterday, data compiled by Bloomberg from 25 ports showed. Prices dropped 2.1 percent this year.

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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