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Oil-Tanker Hire Costs Slide for Third Session as Demand Slows

Hire costs for the biggest oil tankers plying the industry’s busiest trade route fell for a third session amid slowing demand and an ample supply of available vessels in the Persian Gulf.

Charter rates for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slipped 0.2 percent to 32.73 industry-standard Worldscale points, figures from the London-based Baltic Exchange showed today. That’s the longest losing streak since a run of four drops through Feb. 8.

The surplus of vessels available to load in the gulf over the next four weeks came to 100, according to data from Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group. That compared with 89 tankers last week, Marex Spectron data showed. Demand to load ships during March’s first 10 days appeared to be “winding down,” Sy said.

“Pressure was again put on the rates, and with a more-than-ample tonnage situation, it is all back to just about where we were,” investment-banking company Astrup Fearnley said in an e-mailed report today. “The outlook for the spring therefore looks rather soft, with few bright spots on the horizon.”

Daily losses for VLCCs on the benchmark route as determined by the exchange narrowed to $3,413 from $3,439 yesterday. The ships were losing $5,661 a day at the month’s start, exchange data show. Each tanker can hold 2 million barrels of oil, and VLCCs hauling Middle East crude to Asia earned money in only four sessions in the third quarter.

Fuel Usage

The exchange’s assessments fail to account for owners’ efforts to improve returns by securing cargoes for a voyage’s return leg or reducing speed to burn less fuel, known as slow-steaming. The price of fuel, or bunkers, the industry’s main expense, fell 0.6 percent to $635.85 a metric ton, figures compiled by Bloomberg from 25 ports showed.

The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual 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 32.73 percent of the nominal Worldscale rate for that voyage.

The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, added 0.9 percent to 692, the highest since Jan. 2, according to the bourse.

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