Persian Gulf Oil Tanker Rates Extend Losses as Ship Supply Grows

Charter costs for the biggest oil tankers hauling Middle East crude to Asia fell for a sixth day as the supply of vessels in the Persian Gulf expanded.

Rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage declined 0.5 percent to 42.06 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. That’s the lowest since May 28, according to data compiled by Bloomberg. Each ship can hold 2 million barrels of oil.

There are 76 of the tankers available over the next 30 days, compared with 58 a week ago, according to data from Marex Spectron Group, a commodities and freight derivatives brokerage. The VLCC fleet’s carrying capacity will expand 5.1 percent this year, near demand growth of 5 percent, according to Clarkson Plc (CKN), the world’s largest shipbroker.

“The number of VLCCs available in the Persian Gulf is steadily increasing,” Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo, said in an e-mailed report today. It’s “a situation that we think will have a negative effect on freight rates.”

Daily earnings for VLCCs on the benchmark voyage to Asia slipped 1.3 percent to $16,282 today, exchange data showed. The exchange doesn’t account for the fact that ships can cut speeds to burn less fuel.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each 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 42.06 percent of the nominal Worldscale rate for that voyage.

Dirty Index

The Baltic Dirty Tanker Index, a broader measure of oil-shipping costs that includes vessels smaller than VLCCs, increased 0.2 percent to 603, according to the exchange.

The biggest one-day change for ships hauling crude was for tankers heading to northwest Europe from the Baltic Sea, which added 8.7 percent to 65.70 Worldscale points. There were an increased number of fuel oil and crude cargoes for loading in June and that curbed vessel supply, according to Halvor Ellefsen, a shipbroker at Galbraith’s Ltd. in London.

For vessels shipping refined oil-products, the largest move was for tankers heading to northwest Europe from the U.S. Gulf Coast, which slipped 1.3 percent to 83.93 points, 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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