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Oil-Tanker Costs Rise for Third Day as Owners Seek Higher Rates

Charter costs for the biggest tankers hauling Middle East oil to Asia rose for a third day as owners moved to seek higher rates for their vessels.

Rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage added 3.2 percent to 39.25 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. That was the highest since May 15. The bourse will be closed on May 27 for a national holiday.

Charter rates are less than a point below the highest level in almost four months, reached May 14, and gained for a third week in four. Still, the world VLCC fleet’s carrying capacity will expand 5.1 percent this year, near demand growth of 5 percent, according to data from Clarkson Plc (CKN), the world’s largest shipbroker.

Owners “managed to steer the market higher to just under 40 Worldscale points” for VLCCs on the benchmark journey, London-based E.A. Gibson Shipbrokers Ltd. said in an e-mailed report today. “Holidays now provide a natural firebreak, so there’ll be a period of calm.”

Daily earnings for VLCCs heading to Asia from the Middle East climbed to $11,861 from $9,775, according to the exchange. Its assessments don’t account for owners’ efforts to improve returns by securing cargoes for return-leg voyages or reducing speed to burn less fuel, the industry’s biggest expense. Each of the ships can hold 2 million barrels of crude.

VLCCs are earning about $22,200 a day on the route, against $19,000 yesterday, Sam Margolin, an analyst at Cowen Securities LLC, a New York-based investment bank, said in a report.

Flat Rate

The Worldscale system is a way of pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a metric ton, is set once a year. Today’s level means hire costs on the benchmark route are 39.25 percent of the nominal Worldscale rate for the voyage.

The biggest one-day change for ships hauling crude was for VLCCs shipping Middle East oil to Singapore, which gained 3.5 percent to 39.86 Worldscale points. For vessels shipping refined fuels, the largest single-session move was for tankers heading to Europe from the U.S. Gulf Coast, which fell 5.1 percent to 86.07 points, bourse data show.

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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