Oil-Tanker Rates Rise to Eight-Week High Amid Cargo Speculation

Charter rates for the largest oil tankers on the industry’s busiest trade route rose to the highest in almost eight weeks, amid speculation refinery resumptions will drive up the amount of cargoes from next month.

Costs for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage rose 1.4 percent to 34.81 industry-standard Worldscale points, data from the London-based Baltic Exchange showed today. That’s the highest since Jan. 22.

The supply of cargoes available for loading will increase in the second quarter as refineries resume production after a period of maintenance, according to an e-mailed report from Arctic Securities ASA today. Global crude throughput will rise by as much as 2.5 million barrels a day in the next three months, the Oslo-based investment bank said. VLCCs normally haul 2 million barrels of crude each.

“We see this as positive for the ’under the weather’ tanker market,” analyst Erik Nikolai Stavseth said in the note. “Combined with a tonnage list having been reduced from some 100 vessels to 80 there should be upside to freight rates.”

Daily returns on the benchmark route gained 50 percent to $1,193, exchange data showed. The bourse’s assessments don’t account for owners improving returns by securing cargoes for return-leg voyages, or reducing speeds to burn less fuel. The price of fuel, or bunkers, the industry’s main expense, added 0.4 percent to $628.04 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 34.81 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, declined 0.2 percent to 662, a second straight decline, according to the exchange.

Before it's here, it's on the Bloomberg Terminal.