Middle East Crude Oil-Tanker Rates Slump as Ship Surplus Expands

Charter rates for the largest oil tankers hauling Middle East crude to Asia slumped for a fourth session as the surplus of available ships for loading cargoes expanded.

Hire costs for very large crude carriers on the benchmark Saudi Arabia-to-Japan voyage slipped 1.6 percent to 37.7 industry-standard Worldscale points, data from the London-based Baltic Exchange showed today. Rates stayed at the lowest since May 8, the data show.

The supply of supertankers available in the Persian Gulf over the next four weeks expanded by five to 73 ships, according to an e-mailed note from Marex Spectron Group today. The combined carrying capacity of the world VLCC fleet will expand 5.1 percent this year, near demand growth of 5 percent, Clarkson data showed.

“Last week was pretty slow again with only 21 fixtures produced,” said Kevin Sy, a Singapore-based freight-swaps broker at Marex. The supply of oil-tankers “is double that of demand so even if it’s a busy start to the week today rates will likely stay where they are,” Sy said.

Earnings on the benchmark route declined 19 percent to $8,812 a day, exchange data show. Returns were negative March 28 through April 26, according to the exchange. Each of the tankers can hold 2 million barrels of crude. The bourse’s assessments don’t account for owners improving returns by securing cargoes for return-leg voyages or reducing speed to burn less fuel.

The Worldscale system is a way of 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 37.7 percent of the nominal Worldscale rate for the voyage.

The biggest one-day change for crude oil tankers was for ships hauling 80,000 ton cargoes across the Mediterranean, which rose 3.6 percent to 74.6 Worldscale points, exchange data show. For ships moving refined fuels, the largest move was for refined-oil shipments to Japan from the Middle East, which fell 4.7 percent to 77.55 points.