Oil Tankers Lose Most in Five Months as Ship Supply Tops Demand

Losses for oil tankers hauling Middle East crude to Asia, the industry’s busiest trade route, reached the widest level in five months as the supply of ships continued to outpace demand for cargoes.

Very large crude carriers are losing $6,482 daily on the benchmark Saudi Arabia-to-Japan voyage, more than yesterday’s $5,355, figures from the Baltic Exchange in London showed. The current return is the worst since Sept. 3.

There are 110 tankers available in the Persian Gulf over the next 30 days, according to Kevin Sy, a Singapore-based freight-derivatives broker at Marex Spectron Group. That compared with 92 ships on Jan. 3, Marex Spectron data showed. The increased supply is likely to “keep freight rates at bay” for VLCCs, according to a report from Oslo-based investment bank Arctic Securities ASA.

“The prediction was for 30 fixtures this week,” Sy said in an e-mailed report today, against 21 bookings so far. “With that kind of pace and tonnage still sufficiently supplied, rates will again remain where they currently are.”

VLCCs began losing money on the benchmark voyage on Jan. 24, the exchange’s assessments showed. The ships earned money in only four sessions in the third quarter on the journey. Still, the combined carrying capacity of the world VLCC fleet will expand 5.3 percent this year, below demand growth of 5.9 percent, according to Clarkson Plc, the biggest shipbroker.

Fuel Price Jumps

The exchange’s assessments fail to account for owners’ efforts to improve returns by securing cargoes for a voyage’s return leg or by reducing speed to burn less fuel, known as slow-steaming. The price of fuel, or bunkers, the industry’s biggest expense, jumped 2.2 percent, the most in seven months, to $652.31 a metric ton, figures compiled by Bloomberg from 25 ports showed.

Charter rates for VLCCs on the benchmark route fell 1.5 percent to 31.25 Worldscale points, the exchange’s figures showed. That was the third drop in a row. Each of the ships can hold 2 million barrels of crude.

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 31.25 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, rose 0.3 percent to 638, according to the exchange. It’s at the highest since Jan. 25.

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