Oil Tankers Hired Before Cargo Confirmation, Driving Earnings Up

Oil companies are hiring the biggest tankers to carry crude even before confirming the ships will have cargoes to carry, helping to drive owners’ earnings higher, according to Global Hunter Securities.

Charterers hired five very large crude carriers last week to load in December, Global Hunter analyst Omar Nokta said in an e-mailed report today. Such bookings are normally organized between the 10th and 15th of each month and the fact that ships were hired earlier suggests a relative vessel shortage, he said.

A surplus of tankers available to load cargoes in the Persian Gulf over a 30-day forward period was the lowest since June 4 as of Oct. 29, data compiled by Bloomberg show. Charter rates for VLCCs on the benchmark Saudi Arabia-to-Japan voyage had a 10th straight weekly gain last week, the longest rising run since 2004, data compiled by Bloomberg showed.

“Lots of ships are being taken,” said Nigel Prentis, the head of consulting at Hartland Shipping Services Ltd., a London-based shipbroker. “This is resulting in a bit of a scramble and a shortage of vessels, which is unusual.”

Charterers booked 40 VLCCs to load in the week ended Oct. 19, a jump of 60 percent from the average since the start of June, Nokta said last month. Chinese oil refineries will increase processing by 6.3 percent to 10.1 million barrels a day this quarter, the biggest expansion of any country or region, the International Energy Agency in Paris estimates.

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Hire rates for VLCCs, each able to haul 2 million barrels of oil, gained 2.8 percent to 59.03 Worldscale points on the benchmark route on Nov. 8, according to the Baltic Exchange in London. The carriers are earning $44,707 a day on the voyage, compared with a daily loss of $7,694 at this year’s low in February, the shipping bourse’s data show.

“It’s encouraging for owners, but I doubt it’s sustainable overall,” Prentis said.

The VLCC fleet’s carrying capacity will increase 0.9 percent this year, according to data from Clarkson Plc, the world’s largest shipbroker. That’s less than its estimate for an increase of 2.9 percent in demand for the carriers, which transport almost half of the world’s oil cargoes.

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