Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Oil Tankers Squeezed as Rates Drop to Lowest Since ’97: Freight

Oil Tankers Squeezed as Rates Drop to Lowest Since ’97
Teekay Corp., based in Hamilton, Bermuda, is the biggest publicly traded operator of Aframaxes, with 49 of the tankers, according to Clarkson. It also owns vessels hauling liquefied natural gas and ships that process and store oil extracted from offshore wells. Source: Teekay Shipping Corp. via Bloomberg

Aframaxes, already this year’s worst-performing oil tankers, are poised for the lowest annual rates in at least 15 years as Europe’s economic stagnation curbs demand, the region’s most-accurate shipping analysts said.

The 800-foot vessels will make about $12,000 a day in 2012, the least since 1997, said Anders Karlsen, an analyst at Nordea Markets in Oslo. His recommendations on the industry returned 25 percent in the past year, more than any shipping analyst in Europe tracked by Bloomberg. The prediction is 37 percent less than the second-half average of $18,901 anticipated in forward freight agreements, traded by brokers and used to bet on future rates, for northwest Europe, the biggest market for Aframaxes.

The vessels are struggling to win cargoes on all sides of the Atlantic, with European oil demand contracting for a sixth year at a time when the U.S. push for energy independence is driving down crude imports to the lowest since 1999. That’s drawing more South American and West African supply to Asia on routes favoring very large crude carriers, displacing smaller Suezmaxes which in turn are competing with Aframaxes.

“With the situation in Europe, the picture for Aframaxes is just abysmal,” said Erik Nikolai Stavseth, an Oslo-based analyst at Arctic Securities ASA who anticipates an annual average of $10,000. “VLCCs are taking out Suezmaxes, and Suezmaxes are taking out Aframaxes,” said Stavseth, whose recommendations returned 24 percent in the past year, the second-best performance in the region.

Baltic Exchange

Daily rates for Aframaxes, hauling 690,000 barrels, slumped 32 percent to $14,911 since the start of January, according to London-based Clarkson Plc, the world’s largest shipbroker. That compares with a 6 percent advance in earnings for VLCCs, which load 2 million barrels, and a 24 percent retreat for Suezmaxes, with about 50 percent of the capacity. VLCCs carry the most oil worldwide, followed by Aframaxes, Clarkson data show.

The slide in Aframax rates is being mirrored in other classes of shipping. Capesize vessels hauling iron ore and coal are earning $4,812 a day, 98 percent less than their May 2008 peak, according to the London-based Baltic Exchange, which publishes daily rates along more than 50 maritime routes. Panamaxes, with about 50 percent of the capacity, are making $7,138, 92 percent less than the all-time high set in 2008.

The supply of Aframaxes will expand 6 percent this year as demand contracts by the same amount, the worst ratio of any oil-tanker market tracked by Clarkson. The fleet grew 14 percent since 2008, a year in which rates peaked at $87,775, according to data from IHS Inc., a research group based in Englewood, Colorado. Outstanding orders at ship yards are equal to 7 percent of existing capacity, the data show.

Fastest Pace

European oil demand will decline 2 percent to 14.7 million barrels a day this year, the lowest since at least 1996, the Paris-based International Energy Agency estimates. The region’s refineries are shutting at the fastest pace in three decades as economies stagnate or contract and competition from U.S. rivals using cheaper grades of crude intensifies. Aframaxes get 48 percent of their cargoes from Europe, Clarkson estimates.

The U.S. is producing the most crude in 13 years after prices rose almost fourfold in a decade, Energy Department data show. Companies were drilling 2,329 wells last month, the most in a quarter century, the data show. Aframaxes rely on North America for about 14 percent of their cargoes, the same order of magnitude by which imports carried on the vessels will fall this year, according to Clarkson.

The slump in European demand may reverse as its economies strengthen, with the International Monetary Fund predicting 2013 growth of 0.9 percent in the 17-nation euro zone, from a 0.3 percent drop in 2012. The 15 percent weakening in the euro against the dollar in the past year is aiding the monetary union’s manufacturers, potentially boosting demand for energy.

Extra Loadings

More cargoes may emerge as Libyan output recovers from the war that toppled Muammar Qaddafi in October. Output that slumped to 45,000 barrels a day in August reached 1.4 million barrels last month, data compiled by Bloomberg show. It would have to add another 150,000 barrels to reach the pre-war average, equal to about six extra Aframax loadings a month.

Extra shipments will also come from the Baltic Sea port of Ust Luga, which Russia opened in March. It exported 219,900 barrels a day in April, according to data from OAO Transneft, which operates the pipeline to the terminal. Aframaxes are the most commonly used vessels for Baltic Sea crude because of depth restrictions in the area.

The forecasts from Karlsen and Stavseth on Aframax rates, from last year’s $12,726, are among the most bearish. The ships will earn $12,875 this year and $16,000 in 2013, according to the median of 11 analyst estimates compiled by Bloomberg. Earnings averaged $50,010 in 2008, Clarkson data show.

Offshore Wells

Teekay Corp., based in Hamilton, Bermuda, is the biggest publicly traded operator of Aframaxes, with 49 of the tankers, according to Clarkson. It also owns vessels hauling liquefied natural gas and ships that process and store oil extracted from offshore wells.

The company will report a loss of $34.4 million this year, narrowing from $368.9 million in 2011, the mean of four analyst estimates compiled by Bloomberg show. Shares of Teekay were little changed in New York trading since the start of January and will advance 34 percent to $35.13 in the next 12 months, according to the average of eight forecasts.

Additional cargoes from Libya and Russia probably won’t be enough to reverse the slump in overall European shipments. Refinery closures removed as much as 1.3 million barrels a day of capacity since 2009, almost as much as Spain consumes, data compiled by Bloomberg show.

Shipping Associations

The slump in shipping reflects a glut of vessels rather than declining world trade, 90 percent of which is carried by sea, according to the Round Table of Shipping Associations. Shipments of raw materials will rise 4 percent to a record 3.8 billion metric tons this year, Clarkson estimates. Global oil demand will expand 0.9 percent to 90 million barrels a day, the most ever, the IEA estimates.

Trade flows are changing, with China now consuming 9.9 million barrels a day, from 5 million barrels a decade ago, IEA data show. That in turn is shifting demand for different types of ship, with VLCCs now hauling more cargoes to Asia that were previously taken by Aframaxes, said Andreas Vergottis, the research director at Tufton Oceanic Ltd., which manages the world’s biggest shipping hedge fund.

“One VLCC turning up kills three Aframax cargoes,” said Hong Kong-based Vergottis. “Venezuela, the North Sea and North Africa will be cannibalized for Aframaxes.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.