Oil-Tanker Rates Surge as Chinese Demand for Cargoes Accelerates

Rates for the largest oil-tankers surged as Chinese freight traders led an acceleration in Asian demand for the ships to load Middle East crude, sapping a fleet surplus that made the carriers unprofitable almost all year.

A very large crude carrier built 16 years ago was hired today at about 13 percent more than yesterday’s prevailing prices, according to Dynacom Tankers Management Ltd., an Athens-based owner. There hasn’t been a bigger one-day gain in 2013, according to data from the Baltic Exchange, a London-based publisher of freight costs on more than 50 trade routes.

Rising demand has cut a capacity surplus to the smallest since June 4, according to weekly surveys by Bloomberg News. Increased bookings by Chinese buyers depleted the excess in the largest loading region, according to Halvor Ellefsen, a shipbroker at Galbraith’s Ltd. in London. VLCCs earned $5,598 a day on average this year, less than they need to cover running costs including crew and repairs, Baltic Exchange data show.

“We are seeing very big demand,” said Odysseas Valatsas, chartering manager at Dynacom in Athens, adding bookings to Asia are rising most. “The market is going up by the hour and supply hasn’t been this tight for months.”

Rates on the industry’s benchmark Saudi Arabia to Japan route jumped 6.5 percent to 46.48 Worldscale points yesterday, according to the Baltic Exchange. It publishes a price for the route once a day, at about 4 p.m. in London. Earnings surged 28 percent yesterday to $22,358 a day, the largest one-day gain since Oct. 16.

West African demand is also strengthening, meaning a higher proportion of ships have sailed there instead, Ellefsen said.

“Rates have been lifted to a new high spurred by early December West Africa fixing, with rates at excess of 50 Worldscale points and a continued flow of Persian Gulf cargoes,” Ellefsen said by phone today. “We doubt the owning community is going to run out of ambition any time soon.”

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