The Persian Gulf, the world’s biggest crude-oil loading region, has too few supertankers to haul the fuel for the first time in almost a year, potentially helping to sustain a rally in freight costs.
There are 1 percent fewer very large crude carriers, or VLCCs, for hire over the next 30 days than there are cargoes, according to the median estimate of eight shipbrokers and owners surveyed by Bloomberg News today. There was a 20 percent surplus a week ago.
“We are looking for a healthy winter market, and we are looking for rates to go further up,” Axel Styrman, an analyst at Carnegie ASA in Oslo, said by phone today. The drop in supply is due to “normal seasonal factors” that are causing ship bookings to rise, he said.
Demand may continue strengthening into the first quarter of 2011 as members of the Organization for Economic Cooperation and Development bolster imports, Styrman said.
About 20 percent of the world’s crude demand is met by shipments carried on tankers that loaded in the Middle East, according to data from Oil Movements, a Halifax, England-based consultancy, and the International Energy Agency.
Charter rates for VLCCs hauling Saudi Arabian crude to Japan, the route used to settle freight derivatives, climbed 11 percent to 82.06 Worldscale points today, the fifth straight advance, according to data from the London-based Baltic Exchange.
Daily rental income from the route jumped 27 percent to $42,517, according to the bourse. Returns have surged almost 26-fold since Oct. 8. Frontline Ltd., the biggest operator of VLCCs, requires $30,900 a day to break even on them.
The supply reduction stems from a drop in the number of oil company-owned vessels that are being marketed for hire, said Nikos Varvaropoulos, a Dubai-based official at Optima Shipbrokers Ltd. Some of those vessels have been chartered and others have been reserved for the companies’ own cargoes, he said.
The tightened supply-demand balance and consequent rally in freight rates suggest owners are overcoming a tanker-fleet expansion that’s likely to set a record over the next two years, according to Morgan Stanley estimates and data from Clarkson Plc, the world’s largest shipbroker.
A shortfall in vessel supply last occurred on Nov. 16, 2009. Charter rates on the Saudi Arabia-to-Japan route advanced about 20 percent in the month that followed.
Middle East crude suppliers will ship 17.29 million barrels a day in the four weeks to Nov. 13, according to Oil Movements. Global crude demand will be 86.9 million barrels a day this year, according to the Paris-based IEA, adviser to 28 nations.
The Baltic Dirty Tanker Index, a wider measure of crude-oil transportation costs, advanced 1.8 percent to 777 points today, according to the Baltic Exchange.