Oil Stored at Sea Washes Out Rallies

Oil Stored at Sea Washes Out Rallies
Firms Sell Cargoes at Any Hint of Rebound, Flooding Market With Supply
Feb. 5th, 2009
WSL.online

By BRIAN BASKIN

NEW YORK -- Every time the oil market attempts to ignite a rally, an upsurge from the sea of crude stored on waterborne tankers snuffs it out.

The accumulation of oil held in "floating storage" gained speed in December, as available space in traditional onshore storage hubs dwindled due to excess supplies. This floating storage is now among the biggest impediments to oil prices recovering any of the ground lost over the past six months. Companies are quick to sell cargoes at the hint of a turnaround, unleashing a flood of oil onto the market.

More oil is being produced than recession-stricken economies need, and prices have fallen as the extra crude fills storage terminals world-wide. Crude-futures prices are down 72% from the record hit in July. Wednesday, light, sweet crude oil for March delivery settled 46 cents lower, or 1.1%, at $40.32 a barrel on the New York Mercantile Exchange.

The oil sitting at sea adds an extra layer of uncertainty about the supply overhang, which traders said must be whittled down for oil prices to rebound.

Tankers carrying up to two million barrels each aren't counted in official statistics. Ship trackers estimate that as many as 80 million barrels may be on the water, or more than twice the amount kept in the largest commercial storage center in the U.S., in Cushing, Okla.

"There's no database of ships sitting on storage right now. It makes it very, very difficult to speculate" on what is on the water, said one tanker broker.

The flexibility that comes with holding oil on a vessel is important for companies looking to quickly take advantage of a market where oil to be sold next month costs significantly less than a contract to deliver later in the year. The sheer amount of crude floating around prevents any permanent narrowing of that discount.

"You can almost describe it as an accordion effect," said Andy Lebow, senior vice president for energy at brokerage MF Global in New York. "For floating storage to come out you want to see these spreads tighten up. When the oil comes out ... [the spreads] widen."

Members of the Organization of Petroleum Exporting Countries are the only producers capable of and willing to quickly slow the flow of oil. The group has cut output by 3.1 million barrels a day since September, according to a Dow Jones Newswires survey.

OPEC's cuts haven't resulted in lower inventories. U.S. onshore oil stocks rose by 7.1 million barrels in the week ended Jan. 30, one of the largest single-week gains ever, according to the Energy Department.

Several OPEC members have raised the possibility of cutting production quotas again at the group's meeting in March if inventories remain elevated and prices stay depressed.

"OPEC will eventually win the battle, but what floating storage does is it delays the victory," said Michael Wittner, global head of oil research at Société Générale SA.

Oil Traders Seek Tankers For Storage

Oil Traders Seek Another 10 Tankers, Frontline Says
By Alaric Nightingale
Bloomberg
Jan. 7

Frontline Ltd., the world’s biggest owner of supertankers, said oil traders want to charter as many as 10 vessels to stockpile crude to take advantage of higher prices later in the year.

About 25 supertankers were already hired for storage and there are enquiries for 5 to 10 more, Jens Martin Jensen, Singapore-based interim chief executive officer of the company’s management unit, said by phone today.

The traders would buy crude now and sell it for delivery later, profiting from a futures market situation called contango where prices are higher as the year progresses. The vessels could handle as much as 20 million barrels, or about what is produced by OPEC member Algeria in 15 days. They would add to as much as 50 million barrels already hoarded at sea, for a combined amount equal to almost five days of European Union demand.

“I’ve never before seen storage demand on this scale,” said Didier Labat, a Paris-based shipbroker at Barry Rogliano Salles who has worked in tanker markets for about 20 years.

Commodities prices fell the most in five decades last year, with crude dropping more than $100 from the peak of $147.27 a barrel in July, as simultaneous recessions hit the U.S., Europe and Japan. Oil demand in 2008 fell for the first time since 1983, according to the Paris-based International Energy Agency.

Thirty-five supertankers represent about 7 percent of the global fleet of very large crude carriers, according to data from London-based Drewry Shipping Consultants Ltd. Storing oil in tankers may buoy rental rates that fell by a record 78 percent last year as slower economic growth sapped demand for energy.

Financing Costs

Traders are seeking to lease ships for three to nine months, Jensen said. Crude oil for December delivery settled at $58.74 a barrel on the New York Mercantile Exchange today, $16.11 more than the February contract. Oil companies and traders may be able to profit from storing the oil, assuming shipping, insurance and financing costs are covered.

A supertanker would cost about 90 cents a barrel a month for storage depending on the length of the rental, according to data last month from shipbroker Galbraith’s Ltd.

Iran, the second-largest member of the Organization of Petroleum Exporting Countries after Saudi Arabia, idled as many as 15 of its biggest ships in May to store crude oil. That contributed to three consecutive months of higher rental rates for ships.

The cost of delivering Middle East oil to Asia, the world’s busiest route for supertankers, rose yesterday for the first time since Dec. 5, according to the Baltic Exchange in London.

Forward freight agreements advanced. The derivatives are used by traders to bet on the future price of hauling Saudi Arabian cargoes to Japan, an industry benchmark.

Derivatives Advance

The contracts traded at about 46 Worldscale points for the fourth quarter, according to prices from Oslo-based broker Imarex ASA as of 10:34 a.m. London time. They closed at 45 yesterday.

Worldscale points are a percentage of a nominal rate for more than 320,000 specific routes. They give owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

Frontline, based in Bermuda, has advanced 13 percent in Oslo trading this year. The five-member Bloomberg Tanker Index has gained 12 percent.

Liquefied Gas Floating Higher in the Water

Liquefied Gas Floating Higher in the Water
By David Wood
Oct. 13, 2008

Floating liquefied natural gas FLNG facilities are coming of age. In June, Flex LNG, based in the Virgin Islands, announced an agreement with Japan’s Mitsubishi Corp. and Nigeria’s Peak Petroleum to develop and market the world’s first floating liquefaction project offshore Nigeria. A few days later, Flex LNG announced another agreement with Britain’s Rift Oil for an FLNG project offshore Papua New Guinea.

The concept of FLNG has been around since the 1980s, with technology research mainly promoted by Shell and Mobil for projects with largescale capacities that is, some 3 million tons per year. Despite a number of attempts, over the past two decades the majors have been unsuccessful in getting this technology off the drawing board. Over the past two years momentum has moved towards smaller technology companies partnering with marine engineering companies for ship design and fabrication, who then partner with independent upstream companies holding stranded gas reserves.

In addition to the Flex LNG projects each of which have a 1.7 Mt per year capacity, other groups are announcing progress with their own technologies. Last September, Hoegh LNG, Aker, and ABB Lummus announced an FLNG ship with a 1.6 Mt per year capacity. That same month, SBM and Linde said they were developing an FLNG ship with a 2.5 Mt per year capacity. In May, Teekay, Mustang, and Samsung announced that the American Bureau of Shipping would class their FLNG ship, to be used in the gasrich West Africa region. Each group has its own proprietary technologies geared to a project scale generally too small to interest the majors. They are instead targeting small stranded gas fields.

Undaunted by this smallscale competition, in July Shell issued a tender offer for contractors to build its own FLNG design. Weighing 3.5 million tons with a deck area of 450 meters by 75 meters, it will deploy Shell’s proprietary new but tried and tested liquefaction process the Shell Automated CoolDown. Shell continues to focus on largescale potential deployments with its FLNG technology, and its current target project is thought to be its Prelude gas discovery in Australia’s North West Shelf Browse Basin.

Floating Lighter

An innovative solution that liquefies natural gas, but not LNG as we know it, is SeaOne’s LNG LiteTM concept utilizing Compressed Gas Liquids™ CGL™ technology. [For more on SeaOne and compressed natural gas, see ET, October 2007.] In the CGL process, a hydrocarbon solvent is added to the natural gas stream after it is cleaned of impurities, causing the gas to liquefy when subjected to 40° C and 1,400 psi. This first phase of the LNG Lite system occurs on a loading barge moored at an offshore wellhead. The conditioned natural gas stream is then piped aboard the CGL carrier in liquid form and stored in a bundled pipeline 42inch carbon steel containment system with a gas cargo volume of some 1.5 billion cubic feet, contained in 102 miles of coiled and bundled pipe. The CGL carrier offloads its cargo to a transmission barge, which simply expands and separates the gases.

SeaOne says its technology’s economics are favorable when applied to a gas field with 3 trillion cubic feet of reserves, delivering 3 Mt per year for 10 to 15 years using LNG Lite. For a 2,000mile supply chain employing 1.5 bcf CGL carriers about half a standardsize LNG carrier’s capacity, supported by one loading and one offloading barge, SeaOne estimates a total cost of $1.5 billion to $2 billion $0.75 to $1.00 per Mcf. Compare this to an LNG solution of $3.5 billion to $4 billion $1.75 to $2.00 per Mcf. SeaOne also claims that LNG Lite uses less than 60 percent of the energy needed by conventional LNG. Last year, the American Bureau of Shipping awarded ApprovalInPrinciple AIP to the LNG Lite concept vessel, but projects utilizing it are yet to be announced.

It is interesting to review how Flex LNG, only formed in 2006, has managed to jump ahead of its competitors. It placed orders for vessels more than a year ago and is now announcing partnerships along two supply chains. Its LNG Producer LNGP concept is a selfpropelled floating production storage and offloading vessel that combines several existing technologies, including the following.

• sloshingresistant SPB containment systems, retaining maximum deck space

• dual nitrogen turboexpander liquefaction technology

• proven LNG transfer technology

• marine loading arms

• proven shiptoship mooring system

Four LNG Producer hulls each with 170,000 cubic meters of capacity are on order with Samsung Heavy Industries in South Korea. The orders were placed from March 2007 to April 2008 and call for deliveries from December 2010 to March 2012. Each hull includes storage tanks, power generation, offloading equipment, accommodations, shipboard turret systems, and all utilities necessary to support installation of the 1.7 Mt per year topside. Flex LNG reports each will cost some $460 million.

The topside orders for the hulls have yet to be placed, but the design cost is expected to be from $550 to $700 per ton of liquefaction capacity. The topsides will consist of a generic liquefaction module and a fieldspecific feedgas processing module.

The vessels are designed to process some 230 million cubic feet of gas per day. When compared to onshore LNG facilities, FLNG vessels have several advantages.

• modularized

• easy startup and shutdown

• single phase, single component refrigerant

• low equipment count, with a small footprint

• no hydrocarbon refrigerants thus, improved safety

These benefits are well established, but come at the price of lower efficiency than mixed refrigerant processes. The SPB containment system, out of favor for many years in conventional LNG carriers, avoids both the sloshing issues posed by membrane storage tanks and the shortage of available deck space for processing equipment posed by spherical Mosstype tanks.

Mitsubishi’s involvement as an integrated equity partner with Flex LNG in its upstream projects which reportedly include robust longterm LNG offtake terms for 1.5 Mt per year, with prices indexed to oil and gas benchmarks should facilitate the equity and debt financing required for the Nigeria project to deliver its first cargo in 2011. Gas reserves from Nigeria’s Peak Oil project are expected to provide the required feed gas for some 15 years.

Suez: the supertanker super highway

Suez: the supertanker super highway

http://news.bbc.co.uk/1/hi/business/7666877.stm

Frontline Says Fuel Costs May Spur Tankers to Slow

Frontline Says Fuel Costs May Spur Tankers to Slow
By Alaric Nightingale
July 14 (Bloomberg)

Frontline Ltd., the world's largest owner of supertankers, said a jump in fuel costs may spur owners to sail vessels more slowly to conserve energy, shrinking fleet supply and bolstering ship-rental rates.

The shipper and ``several major owners'' sailed 20 percent slower than normal toward the end of last year after ``low'' demand and record fuel costs hurt margins, according to a May 2 regulatory filing from the company. That cut fleet capacity by about 10 percent and was followed by the biggest two-month gain in freight rates in November and December for at least 16 years.

The possibility of slowing is ``soon again emerging,'' Jens Martin Jensen, Oslo-based interim chief executive officer of Frontline's management unit, said in an e-mail July 10. ``I believe all owners, including ourselves, are monitoring this on a daily basis.''

Supertankers, ships bigger than the Chrysler Building and designed to haul 2 million-barrel cargoes of crude, burn about 100 metric tons of marine fuel a day when sailing at full speed, according to Riverlake Shipping SA, Switzerland's biggest shipbroker. Marine fuel, or bunkers, advanced to a record $754.50 a ton in Singapore July 11, according to prices on Bloomberg.

Frontline fell 0.5 krone, or 0.2 percent, to 326.5 kroner ($64.25) as of 2:16 p.m. in Oslo trading, valuing the shipping line at 24.4 billion kroner. The shares earlier fell as much as 2 percent. The stock has gained 26 percent this year.

Supertanker owners trimmed about $20,000 from their daily fuel costs by slowing down last year, the May 2 filing said. Fuel now represents about 85 percent of daily costs, Jensen said.

Shipping Competitors

Frontline and its competitors sailed at about 12 knots last year, compared with 15 knots normally, according to the filing.

Supertankers are sailing close to their fastest speed for at least two months, according to data complied by Bloomberg.

The average VLCC is moving at 10.45 knots, 13 percent faster than on May 29 when they were traveling at 9.22 knots. The data include ships at anchor. Tanker rental rates are on course for a record year, earning about $107,000 a day, a Bloomberg survey of 13 analysts and brokers this month showed.

Sailing slower would help mitigate a fleet expansion that the International Energy Agency said July 1 will ``massively'' exceed growth in oil demand in the next two years.

Owners decided to slow down last ``autumn,'' Frontline Chief Financial Officer Inger Klemp said by phone July 10. The jump in ship-rental rates after that probably encouraged some to speed up again, she said.

Still, other owners may decide that current rental earnings are too good to sail slower, said Per Mansson, managing director of tanker broker Nor Ocean Stockholm AB.

``It won't happen,'' he said in an e-mailed note today. ``Owners cannot start giving away money in a market like this to improve things at a later stage.''

John Fredriksen

Billionaire Cashes In On Offshore Oil Rush
http://online.wsj.com/article/SB120700920323078811.html?mod=googlenews_wsj

With Supply Scarce, His Rigs Are Hot;
$600,000 Day Rate

By GUY CHAZAN
April 1, 2008

LONDON -- As a buccaneering oil trader, John Fredriksen shipped crude from trouble spots like Iran and used hardball tactics to build up the world's biggest tanker fleet. The son of a welder, this modern-day Onassis is now Norway's richest man, worth at least $7 billion.

He is also one of a new breed of entrepreneurs reshaping the oil business.

Mr. Fredriksen has amassed an array of state-of-the-art oil rigs capable of drilling in the world's deepest oceans. With production declining in mature basins like Alaska, the deep waters of the Gulf of Mexico and offshore Brazil and West Africa are oil's hottest real estate. But the rigs that can drill there are in short supply. That means contractors like Mr. Fredriksen can charge huge premiums for their services.

His success is part of a broader power shift from Big Oil -- the Shells, Exxons and BPs of the world -- to the oil-field-services sector. As they venture into ever harsher and more remote environments, the majors are becoming more reliant on these outside contractors -- geologists, well testers, seismic data experts and offshore drillers -- to find and extract their crude. The service companies are the new rule-setters in an increasingly costly game.

Helping to fuel their rise is a growing fear that the world's oil production may be about to plateau and decline. "Peak oil" anxiety has contributed to the steep increase in the price of crude, which has nearly tripled since 2004. Peak theory is now feeding into wider concerns that demand for all the world's resources -- not only oil but wheat, copper and other commodities -- is increasing faster than supply, creating new limits to global growth.

Mr. Fredriksen made an early bet many thought was insane. Three years ago, his company, Seadrill Ltd., broke one of the cardinal rules of the rig business. It ordered two "ultradeep water" rigs, capable of drilling in waters at a depth of at least 7,500 feet, for nearly $900 million -- on spec. It didn't have a single contract from an oil company to guarantee them.

"We didn't feel it was a risk," said Mr. Fredriksen, a 62-year-old with piercing blue eyes, elegantly attired in a blazer and cravat on a recent afternoon in his London office. "We knew there was a boom coming on."

There's no telling how long that boom will last. But Mr. Fredriksen sees years of strong demand ahead. The amount of oil pumped from deep-water fields will nearly double between 2005 and 2010 to about 11 million barrels a day, according to the U.S. Energy Information Administration. Douglas-Westwood, a consulting firm, says capital spending on deep-water oil will rise to $25 billion annually by 2012, nearly double the figure for 2003.

Yet there are only 39 rigs in the world capable of drilling in ultradeep water. Seadrill has four of them, with eight more under construction. While there are older companies that are bigger than Seadrill, few have such a modern fleet.

That gives Mr. Fredriksen enormous pricing power. His units are in such demand he can charge major oil companies nearly $600,000 a day to use them. Similar rigs were earning about $70,000 a day just five years ago. With leasing rates like these, a vessel that cost half a billion dollars to build can pay for itself in as little as four years.

The Oil Outsider

John Fredriksen was born in a working-class Oslo suburb in 1944. His humble background set him apart from Norway's blue-blooded shipping aristocracy -- men like Sigval Bergesen and Anders August Jahre, the Nordic equivalent of the Vanderbilts and Rockefellers. They, along with the tycoons of Greece and Hong Kong controlled the world of international shipping in the postwar years. "There was an Ivy League of shipowners -- the founding fathers of the business," says Boris Nachamkin, one of Mr. Fredriksen's first bankers. "He was the outsider."

His first job was as a shipping broker, running cargoes of fish from Iceland to Hamburg, Germany. After brief stints in Canada and New York, he moved to Beirut in the late 1960s. There he shipped crude out of Saudi Arabia and Iraq and sent back cargoes of refined products. He soon developed a firm grasp of the oil trade. "He knows how oil moves, who gets it when it's tight and when it's flowing quickly," says Morten Arntzen, another of Mr. Fredriksen's former bankers and later a business partner.

By the mid-1970s, shipping was in deep trouble. The 1973 Arab-Israeli war sent oil prices into orbit. Fuel consumption plummeted in the West, and demand for long-haul tankers collapsed. Many venerable shipping companies went bust in the slump and Norway's fjords were full of empty tankers. Mr. Fredriksen sensed an opportunity. He started leasing cheap ships and later buying many of them outright.

In the 1980s, Mr. Fredriksen was one of the few traders exporting Iranian oil during the Iran-Iraq war, shuttling tankers through the Persian Gulf from Kharg Island, a big oil terminal that was repeatedly targeted by Saddam Hussein's air force. Mr. Fredriksen says his tankers were hit three times by Iraqi missiles.

A noted reveler, he would often hold court throughout the 1980s at Oslo's fashionable Theatre Café. Locals nicknamed his regular table there Kharg Island.

"When he was traveling, he needed three brokers with him -- one recovering from the night before, one on duty and the other preparing for the next day," says Clarence Dybeck, a fellow shipowner from Sweden. "He had a tremendous capacity for work."

In the world of Norwegian business, he tended to keep a low profile. He never admitted to owning any ships, claiming instead to be acting on behalf of a group of unnamed investors. That was common in the industry, where shipowners could be held liable for wrecks and oil spills, says fellow Norwegian Tor Olav Troim, vice chairman of Frontline, Mr. Fredriksen's shipping company.

"I was more secretive" in those days, says Mr. Fredriksen. Domestic critics denounced him for shipping oil to South Africa, in defiance of the apartheid-era trade embargo. He says all Norwegian shipping firms did it.

In 1985, he moved to Cyprus, lured by lower taxes and the island's reputation as a shipping center. "It's almost impossible to do business in Norway today," he says, citing the tax regime and frequent regulatory changes. In 1986, the Norwegian authorities charged him with fraud, alleging that his tankers were found to have used customers' cargoes for fuel. Police raided his offices in Oslo, and he turned himself in a few days later. The main charges were later dropped and he paid a fine on a lesser charge. But the affair still rankles: It was motivated by "jealousy" of his success, he says.

Mr. Fredriksen's penchant for secrecy changed in 1996 when he bought Frontline, a publicly listed Swedish shipping company. It soon grew into a giant, and a key force in the consolidation of the fragmented shipping business. In 1996 he owned seven tankers. By 2001, Frontline had 70. The company today has the world's biggest tanker fleet, with 86 vessels.

Hardball Tactics

A year after he bought Frontline, he launched a hostile takeover bid for ICB Shipping, a Swedish tanker firm. His methods -- full-page ads in local newspapers, angry letters to ICB board members, pressuring shareholders -- shocked some Swedes. "No one had seen those sort of tactics before in Sweden," says Clarence Dybeck, the then head of ICB. "He could be quite brutal." After a grueling two-year battle, he finally won control of the company.

Mr. Fredriksen was meanwhile benefiting from big changes in the oil-shipping industry. After notorious oil spills like the Erika, a tanker which broke up off the coast of France in 1999, oil companies stopped chartering dangerous single-hull tankers. Such ships have a single outer shell between the oil and the ocean; double-hull tankers, which have an extra space between hull and storage tank, are considered safer. Shipowners who had invested in double-hulls cleaned up. John Fredriksen was one of them.

The tanker business was also coming out of its slump. Fields close to the big oil-consuming countries -- in the North Sea, Alaska and Mexico -- were declining. Crude was increasingly coming from faraway places like West Africa and the Middle East. China and India were emerging as major oil importers. Long-haul tankers were back in vogue. With his expanded fleet, Mr. Fredriksen cashed in on a freight market that was entering a new golden age. By 2001, the chartering rates paid by the oil companies to ship crude around the globe were the highest they had been in 30 years.

Already a billionaire, in 2002 he bought the Old Rectory, a mansion in London's ritzy Chelsea district, from the Greek shipping family of Theodore Angelopoulos, for £38 million (at the time, about $57 million), one of the highest prices ever paid for a London home. The house has a rich history: The Battle of Waterloo was planned in its garden.

He also continued to diversify. He currently has stakes in dozens of businesses, from shipping to fish farming to oil trading. His empire includes "dry bulk" ships, those that carry things like coal, steel and grain, as well as liquefied-natural-gas carriers and tugboats that supply offshore oil platforms. His company Marine Harvest is the world's biggest producer of farmed salmon. Among other investments: Aktiv Kapital, a buyer of distressed consumer debt, and Arcadia Petroleum, a big crude-oil trading firm.

A Big Rig Bet

One of his boldest moves, in terms of startup costs and the risk of failure, was into the drilling business. As oil prices began their ascent in 2003, contractors were putting in big orders for mobile drilling platforms that operate in shallow waters. But Mr. Fredriksen says his contacts in Asian shipyards told him the majors weren't investing enough in deep-water rigs.

Yet deep-water drilling's potential was clear: Offshore Angola, some companies drilling for crude had an unprecedented 95% "hit" rate, says Mr. Troim. Messrs. Fredriksen and Troim started ordering semisubmersibles, or "semis" -- one of the most advanced kind of floating rigs. In June 2005, a month after taking the newly created Seadrill public, they commissioned two semis, one for $394 million and another for $490 million. "Everyone was laughing at us at the beginning," says Mr. Troim. "We were Mr. Nobody."

Larger than a football field, semis are floating vessels, supported by big pontoonlike structures submerged below the sea surface, that can operate in waters up to 10,000 feet deep. Dynamic positioning -- a computer-controlled thruster system fed by data from satellites and transponders located on the seabed -- keeps them in place directly above the oil well. The price tag for such a vessel is now around $655 million.

Seadrill expanded aggressively, ordering new rigs and swallowing up competitors in a flurry of deal making. Its market value has grown from $200 million when it listed in 2005 to $10.5 billion today.

"Fredriksen and Troim move very fast," says Odd Harald Hauge, a Norwegian journalist who has written two books on Mr. Fredriksen. "They do deals on napkins."

A Wave of Mergers

One of their most daring acquisitions was of Smedvig ASA, a big Norwegian driller, in January 2006. Noble Corp., a U.S. rival, had taken a 30% stake in the company, but Seadrill snapped up shares and eventually forced Noble to sell out. "We bought that in a taxi in Seoul," says Mr. Fredriksen.

The revved-up drilling sector was being swept by merger fever. In July 2007, Transocean Inc. and GlobalSantaFe Corp., the world's two biggest offshore-drilling contractors by market value, agreed to an $18 billion merger. Seadrill itself has often been touted as a potential takeover target by a more established U.S. or Asian driller. Mr. Troim said it approached some U.S. rivals about a tie-up in 2006, but the talks went nowhere.

A merger would help solve one of Seadrill's key problems -- a lack of staff, especially engineers and drill operators who are in short supply. Seadrill has tried to deal with that by aggressively poaching managers and crews from its peers. The company recently hired one of Transocean's top executives to run its Houston office.

There are some worries the sector's boom may be unsustainable. Analysts fret that contractors may have ordered too many rigs, which will lead to overcapacity and a collapse in day rates. But others say high oil prices, which underpin the business, will stay lofty for years to come, and that with many rigs contracted out well into the next decade, the deep-water drillers have a bright future.

For the time being, the majors are in a bind. In the 1990s, when oil slumped to $10 a barrel, they aggressively cut costs, shed jobs and divested themselves of assets. When oil prices recovered, they often lacked personnel and equipment and were forced to outsource a lot of the work of drilling and extracting crude.

Some of the majors are now resorting to building their own, cheaper rigs. Royal Dutch Shell PLC has designed a new class of drilling vessel, the bully rig, which it says is suitable for both deep-water and arctic conditions and will cost 20% less to lease than the competition. But it will only take delivery of the first two in 2010.

Mr. Troim was recently in Houston meeting with potential customers: One person familiar with the talks said oil executives came away shaken by the sky-high rates Mr. Troim was demanding -- up to $600,000 a day. Mr. Troim says Seadrill's charges are typical for the industry, and the market can bear them. "It's been fun to see a company grow from two men and a dog to being a major player in this market," says Mr. Troim. "More fun than making money."

Write to Guy Chazan at guy.chazan@wsj.com

Oman to Spend $4 Billion on Shipping Fleet

Oman to spend $4bn on shipping fleet
by Luke Pachymuthu
Monday, 24 March 2008
ArabianBusiness.com

Oman's state shipping firm will spend up to $4 billion in the next three to four years to expand its fleet size, a senior company official said, part of the sultanate's efforts to upgrade its oil industry.

Oman Shipping Company (OSC) is looking to grow its fleet mainly to meet demand for energy transportation, Chief Financial Officer (CFO) Kuldeep Mathur told newswire Reuters in a recent phone interview.

"We are expanding the fleet with a view of the future demands for our export grade crudes and products," he said.


Part of OSC's multi-billion dollar expansion includes a recent order to build 10 Very Large Crude Carriers (VLCCs), Mathur said.

In February, OSC placed two separate orders with South Korea's Hyundai Heavy Industries Company, the world's largest shipbuilder, to build five supertankers, and with Daewoo Shipbuilding and Marine Engineering Company to build another five VLCC's. The deals were valued at about $770 million each.

OSC is in discussions with the National Iranian Tanker Company (NITC) on securing a long-term charter contract for at least five of the recently ordered supertankers, Mathur said.

"Yes, we are discussing the option with them, along with others, but we are not decided yet," Mathur said declining to offer details.

International pressure and the implementation of broad-based sanctions on Iran, led by the US, have made it difficult for the Islamic republic to access funding from financial institutions.

"Sleeving through Oman would make sense, because it allows for Iran to get around the issue of financing," said a Singapore-based sales and purchase shipping broker, referring to the practice when one firm with limited credit uses another with better credit to do a trade on its behalf for a fee.

NITC was not immediately available for comment.

The expansion planned by OSC, whose stakeholders are the Ministry of Finance and Oman Oil Company, is part of the sultanate's broader vision to upgrade its shipping and chartering sector and depend less on leased vessels.

Oman, like other Gulf states, is also trying to diversify its economy away from oil, which generates almost half its gross domestic product but is seeing declining production.

OSC boasts a current fleet size of seven liquefied natural gas (LNG) tankers and two clean tankers, with four oil tankers including a VLCC and Very Large Gas Carrier on the order book.

The CFO said part of the expansion plan included growing the company's clean tanker fleet, by adding between 15 and 20 refined product tankers.

"We are looking at new and considering buying second-hand clean product tankers as well... we have certain refineries in Oman and taking position on this to provide employment prospects for these vessels," Mathur said, without giving details.

Oman, which operates two refineries - Oman Refinery Company and Sohar Refinery Company with a combined capacity of more than 225,000 barrels per day (bpd) - is planning a third facility of about 300,000 bpd at the southeastern city of Al-Duqm.

The proposed refinery, part of the Duqm Refining and Petrochemical Complex and is due for completion in 2012, will have a significant refined product export slate, sources familiar with the project said.

"We should see more potential for export of light distillate products like naphtha and gasoline to support growing regional demand," Mathur said.

Financing for the company's fleet expansion could likely come via loan arrangements from the North Asian institutions, Japan Bank for International Cooperation, Korea Export Insurance Corporation (KEIC), or European banks BNP Paribas and Societe Generale, Mathur said.

"We have a very good relationship with several banks, and could look to either one to finance our expansion plans," he added.

He said the expansion would include some general cargo and multi-purpose vessels. The firm now operates two Supramax bulk vessels. (Reuters)

Baltic Dirty Tanker Index

Baltic Dirty Tanker Index, BDTI, chart, graph

Double Hull (DHT) Shares Rise on Upgrade

Shares of Double Hull Tankers Rise After Analyst Suggests Stock Is Undervalued
January 18th, 2007

NEW YORK (AP) -- Shares of Double Hull Tankers Inc., which owns and operates a fleet of crude oil tankers, soared Friday after a Citi analyst raised the stock to "Buy," citing its improved value following steep sell off.

Analyst John Kartsonas said that despite his negative expectations for the tanker market in the next several years, Double Hull's current share value provides a buying opportunity for investors.

He noted that the company's recent implementation of a fixed quarterly dividend provides steady benefits for investors as well, despite some investors frowning over the new 25 cent-per-share dividend as a cut from previous quarters.

Quarterly dividends ranged between 37 cents a share and 44 cents a share in 2007.

"Management's decision to reduce the dividend might have upset some investors, but the reality is that longer term it should prove to be a wise decision -- a company cannot pay dividends that are well above earnings and rely purely on the equity markets for growth," Kartsonas said in a note to clients. "Given the importance of dividends in the shipping world, we believe investors will continue to view Double Hull as a dividend provider but this time with the additional benefit of growth."

He raised his estimates for 2008, citing stronger-than-expected first-quarter vessel rates and newly-acquired carriers.

However, lowered his 12-month price target to $12 from $14, saying he expects higher costs in 2008. He also lowered his 2009 estimates on lower expected vessel rates.

Shares of Double Hull rose 90 cents, or 9.5 percent, to $10.40 Friday. The stock has ranged between $9.32 and $18.79 in the past 12 months.

Bloomberg Roundup

Asian Aframax Rates Fall Most in Two Years as Charters Decline
By Katherine Espina
Jan. 9 (Bloomberg)

Asian aframax hiring rates fell the most in two years as chartering demand slowed following a pick- up in hiring before the Christmas holidays and the Northern Hemisphere winter.

The rate to transport 80,000 metric tons of fuel from Kuwait to Singapore dropped 6.9 percent to Worldscale 220.42 yesterday, according to the London-based Baltic Exchange. That's the biggest one-day decline since Jan. 3, 2006.

Aframax rates on the Middle East-Singapore route have fallen 25 percent since the end of last year. Shipping a ton of fuel on the route costs $22.43, based on Bloomberg data.

``The build-up of tonnage is the main concern, and a substantial boost in enquiry levels is needed to turn things around,'' Oslo-based analysts Henrik With and Glenn Lodden at DnB NOR Markets, said in their weekly report. ``Sentiment for suezmaxes and aframaxes is quite muted.'' A suezmax can move one million barrels of oil.

The demand for supertankers, also known as very large crude carriers or VLCCs, will influence the market for aframaxes, according to Matsui & Co.'s Katsunori Nishikawa, general manager for chartering at the Tokyo-based company's shipbroking division.

Freight rates for supertankers on the benchmark Persian Gulf-to-Japan route have fallen 31 percent since end-2007, according to data on the Baltic Exchange. Rates on the route slumped 16.5 percent to Worldscale 191.47 yesterday, according to data on the Baltic Exchange.

Two aframaxes, capable of moving a total of 211,778 tons of cargo, are so far scheduled to arrive in Singapore next week. That compares with five aframaxes with a combined capacity of 538,257 tons arriving in the city state this week, according to Bloomberg data.

Persian Gulf Tanker Rates May Fall as Owners' Confidence Wanes
By Alaric Nightingale
Jan. 10 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may fall for an 11th trading day as an increase in ship supply undermines owners' confidence.

The benchmark hire rate for very large crude carriers, or VLCCs, sailing to Asia climbed at the fastest pace in at least 16 years in November and December, prompting oil companies to withhold cargoes to temper the gains. The key rental price has dropped every day since Dec. 19, the Baltic Exchange data showed.

``It's dropping in the way that it came up,'' Nikos Varvaropoulos, an Athens-based broker at Optima Shipbrokers, said by phone today. ``Every charterer is trying to fix lower and lower and lower. It's a matter of mentality.''

Chevron Corp., the second-largest U.S. oil company, hired the tanker Astro Chorus at a rate of 175 Worldscale points, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's 0.6 percent higher than the London-based Baltic Exchange's benchmark rate of 173.91 points.

Astro Chorus, built in 2001, is fitted with two steel hulls to cut the risk of an oil spill. Supply of cheaper-to-hire single-hulled tankers is ``very good,'' said Varvaropoulos. The exchange's key assessment, which is for vessels up to 15 years old, takes into account both vessel types.

There are 115 modern two-hulled tankers available for hire within the next 30 days, according to the report from Barry Rogliano Salles. There were 111 yesterday.

Booking Ships

Still, refineries have yet to begin booking the ships they need to load in February and there are about 30 outstanding cargoes for January. By this time last month, all of December's Middle East cargoes had been assigned to tankers.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Each flat-rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 173.91 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $141,763 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and marine fuel prices for Fujairah compiled by Bloomberg.

Asian Aframax Charter Rates Fall an Eighth Day on Tanker Supply
By Katherine Espina
Jan. 11 (Bloomberg)

Asian aframax hiring rates fell for an eighth day to the lowest in six weeks as slowing demand for bigger tankers trickled down to smaller vessels.

The rate to transport 80,000 metric tons of fuel on an aframax tanker from Kuwait to Singapore dropped 3.9 percent to Worldscale 183.75 yesterday, bringing the decline so far this week to 26 percent, according to the London-based Baltic Exchange. The rate is the lowest since Nov. 28. Shipping a ton of fuel on the route costs $19.94, based on Bloomberg data.

Aframax rates on the Middle East-Singapore route have slumped 33 percent since the start of this year as chartering demand slowed following a rush in hiring before the Christmas holidays and the Northern Hemisphere winter. Charter rates for supertankers, which can carry two million barrels of oil, on the Middle East-Japan route have plunged 34 percent 10 days into the new year because of an increase in the supply of ships.

``The market sentiment in the very large crude carrier market is weak and it's affecting aframaxes and suezmaxes,'' according to Takeshi Ando at the tanker team of shipbroker Matsui & Co. in Tokyo. A suezmax can move one million barrels of oil.

The rate on the benchmark Persian Gulf-to-Japan route declined 4 percent to Worldscale 166.88 yesterday, according to data on the Baltic Exchange.

The market's main concern is the ``build-up of tonnage'' and only a substantial rise in demand will turn rates around, according to Oslo-based analysts Henrik With and Glenn Lodden at DnB NOR Markets, in their weekly report.

Persian Gulf Oil-Tanker Rates May Decline on Canceled Bookings
By Alaric Nightingale
Jan. 11 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may fall for a 12th day on signs oil companies are canceling bookings and waiting for the market to drop.

Companies provisionally hire ships subject to port approvals and other conditions. It can take between one day and one week for an oil company to commit irrevocably to a ship rental and it costs nothing to cancel a conditional booking.

Oil companies are ``just fixing and failing and fixing and failing,'' Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone today. ``They make a deal, wake up the next morning, see the market is lower, and fail it.''

Chartering officials withheld cargoes since the end of 2007 to temper the fastest gain in tanker rates in at least 16 years in November and December on the benchmark voyage between the Middle East and Asia. That may have created a backlog of cargoes that will curb further declines, according to Mansson.

No new tanker bookings were reported today by shipbrokers. The London-based Baltic Exchange's benchmark assessment for voyages to Asia fell 4 percent to 166.88 Worldscale points yesterday, almost half the level it reached on Dec. 18.

There are 114 modern tankers available for hire within the next 30 days, according to a report today from Paris-based Barry Rogliano Salles. Yesterday there were 115.

Persian Gulf Tanker Rates May Drop Amid U.S. Recession Concern
By Alaric Nightingale
Jan. 15 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may extend 13 days of declines on concern that U.S. demand for oil will drop.

Goldman Sachs Group Inc. joined Merrill Lynch & Co. last week in estimating that the world's largest economy may already be in a recession. That will curb energy demand, Boone Pickens, chairman of Dallas-based hedge fund BP Capital LLC, said yesterday.

``Traders will disappear and oil companies will run their refineries with less output'' in a recession, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said in an e-mailed note today. The number of tankers booked has been ``much less'' than normal, a sign oil demand may already be waning, he said.

China International United Petroleum & Chemical Corp., or Unipec, hired the tanker Hyundai Star at a rate of 125 Worldscale points, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's 16 percent below the London-based Baltic Exchange's benchmark rate of 148.44 points for voyages to Asia.

Hyundai Star, built in 1995, probably cost less to hire than the benchmark because it's fitted with one steel hull separating its cargo from the ocean. The exchange assessment also includes bookings of double-hull vessels that cut the risk of an oil spill.

Asian Aframax Charter Rates May Extend Decline on Vessel Supply
By Katherine Espina
Jan. 16 (Bloomberg)

Asian aframax charter rates may extend declines after falling for an 11th day as a dearth of cargoes causes a surplus of tankers.

The rate to transport 80,000 metric tons of fuel on an aframax tanker from Kuwait to Singapore dropped 0.71 percent to Worldscale 174.17 yesterday, according to the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $17.45, based on data compiled by Bloomberg.

``There's a lack of activities and I don't see any indication that the market has hit bottom,'' according to Matsui & Co.'s Katsunori Nishikawa, general manager for chartering at the Tokyo-based company's shipbroking division. ``We see more declines as very large crude carrier rates are down as well.''

Aframax rates on the Middle East-Singapore route have Slumped 36 percent this month as chartering demand slowed following a rush in hiring before the Christmas holidays and the Northern Hemisphere winter. Charter rates for supertankers, which can carry 2 million barrels of oil, on the benchmark Middle East-Japan route have plunged 55 percent in the past 14 days, influencing fees for smaller tankers.

The rate to hire a supertanker, also known as a very large crude carrier, on the benchmark Persian Gulf-to-Japan route declined 2.2 percent to Worldscale 145.16 yesterday, according to the Baltic Exchange data. That's the lowest since Nov. 26.

`Bloated Pool'

``Shipowners do not have the best bargaining position currently,'' Oslo-based Henrik With and Glenn Lodden at DnB NOR Markets wrote in their weekly report. While demand may rise because of February cargoes, there is a ``bloated pool'' of supertankers, suezmaxes and aframaxes, With and Lodden said.

A suezmax can transport 1 million barrels of oil while an aframax can move 650,000 barrels.

Still, tanker demand usually rises ahead of the week-long Chinese Lunar New Year celebrations in February, shipbrokers said.

``I do hope there will be more activities as usually before the Chinese New Year, charterers would cover their forward positions, but it seems that fuel oil demand from China is not that much,'' Nishikawa said by phone from Tokyo.

China, the world's biggest oil user after the U.S., imported 14 percent less fuel oil last year, with shipments dropping to 24 million tons, according to preliminary data from the Beijing-based Customs General Administration yesterday.

Persian Gulf Tanker Rates May Drop as Owners Vie for Cargoes
By Alaric Nightingale
Jan. 17 (Bloomberg)

-- The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may drop for a 15th day after shipowners with vessels for hire in January failed to find cargoes.

There are 34 very large crude carriers, or VLCCs, still seeking cargoes to load in January compared with 10 to 15 outstanding consignments, Paris-based shipbroker Barry Rogliano Salles said in a report today.

``You have owners that are open in January and they will look at February dates,'' Mathieu Philippe, a tanker broker at Barry Rogliano Salles, said by phone today. The decline in rates will probably halt next week, he said.

VLCC rates to Asia plunged 59 percent since December as oil companies withheld cargoes to halt the fastest gains in prices for at least 16 years. The International Energy Agency yesterday cut its forecast for first-quarter global crude demand by 100,000 barrels a day, citing warmer-than-normal U.S. weather.

CPC Corp., Taiwan's state oil refiner, hired the tanker Grand Lady at a rate of 83.5 Worldscale points for a voyage to Asia. That's 36 percent below the London-based Baltic Exchange's benchmark assessment of 130.78 points for voyages to Asia.

The rental rate is lower than the Baltic Exchange's assessment because Grand Lady is fitted with a single hull and because its owners chose to send the vessel to Asia so that it could be converted into an iron-ore carrier, Philippe said. The Baltic Exchange also takes into account prices of double-hull tankers that cut the risk of an oil spill.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Hire Rates

Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 130.78 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $100,854 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

Baltic Dirty Tanker Index Chart Test

Gulf rates could drop as tankers chase cargoes

Gulf rates could drop as tankers chase cargoes
Bloomberg
Published: January 07, 2008, 00:29

Oslo: The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may fall for a seventh trading day as ships that are available for hire within the next several days compete on price for cargoes.

Refineries have hired ships for more than half of January's expected cargoes, according to an e-mailed report from Paris- based Barry Rogliano Salles.

At the same time, some owners failed to find cargoes at near-record rental rates and may now compete on price to haul the consignments, Mathieu Philippe, a Dubai-based broker for the company, said by phone.

"The only problem is vessels that are going to be open within 10 days are going to be cheap," he said.

"If they don't fix now, they are going to have to swallow a lot of waiting time" earning nothing. Once those carriers have found cargoes, Phillipe said he expects rental rates to rally again.

Very large crude carrier, or VLCC, rates soared in November and December after Opec increased crude oil production and amid signs Japanese refineries may have hired extra vessels to replenish stockpiles that were near their lowest in 20 years.

Royal Dutch Shell Plc, Europe's biggest oil company, hired the tanker Irene SL at a rate of 280 Worldscale points, according to Barry Rogliano.

Discharge options

That's 11 per cent above the London-based Baltic Exchange's benchmark assessment of 250.63 points for shipments to Asia.

The booking may have cost more than the benchmark because Shell took out alternative discharge options, including to the Red Sea.

Increased discharge options, especially when they include shorter-distance voyages such as to the Red Sea, normally cost more because owners can't plan follow-up voyages.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes.

Flat rates for every voyage, quoted in US dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Each flat-rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 250.63 Worldscale points, owners of double-hulled VLCCs, can earn about $223,319 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

http://www.gulfnews.com/business/Oil_and_Gas/10179910.html

Persian Gulf Tanker Rates May Drop

Persian Gulf Tanker Rates May Drop as Refineries Delay Cargoes
By Alaric Nightingale
Dec. 20 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may drop as oil companies resist paying record prices to hire ships.

Very large crude carriers, or VLCCs, are making about $300,000 a day on benchmark international trade routes to Asia, according to prices compiled by Bloomberg. In 2004, the previous record year, they made $290,000 a day, according to London-based shipbroker Galbraith's Ltd.

Charterers who hire ships for oil companies may now be ``holding back if possible for fear of paying too much,'' Charlie Fowle, a director at the company, said in an e-mailed note today.

Sinochem Corp., China's biggest chemicals trader, hired the tanker C. Champion at a rate of 285 Worldscale points, according to a report today from Oslo-based shipbroker PF Bassoe AS. That's 10 percent below the London-based Baltic Exchange's benchmark rate of 317.66 points for voyages to Asia.

Higher Rates

Flat rates for ships loading next year are higher than those in 2007 because of record refueling costs. The Baltic Exchange's assessments reflect 2007 flat rates until the end of the year.

At 317.66 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $297,0777 a day on a 39-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

That means costs for Japanese refineries fell 0.4 percent to $7.42 a barrel from $7.45 a barrel on Dec. 18.

There are 23 modern two-hulled tankers available for hire within the next 30 days, according to a report today from Paris- based Barry Rogliano Salles. There were 40 such ships competing for cargoes two months ago, according to the shipbroker.

Hebei Spirit

South Korea Battles Biggest Oil Spill in 4 1/2 Years
By Sungwoo Park and Bomi Lim
Dec. 7 (Bloomberg)

South Korea battled to contain the world's biggest oil spill in 4 1/2 years after a supertanker collided with a barge near Hyundai Oilbank Co.'s refinery on the nation's west coast.

The collision caused three holes on the ship's side and 10,500 metric tons (78,750 barrels) of crude oil was spilled, the Ministry of Maritime Affairs and Fisheries said in a statement today. The Hebei Spirit has stopped leaking and the slick is 7.4 kilometers (4.6 miles) long and 2 kilometers wide, it said.

Hebei Spirit is fitted with one hull, according to Lloyd's Register-Fairplay, which assigns ship-registration numbers. An international ban on such ships is due to start in 2010. Modern tankers are fitted with two hulls to cut the risk of an oil spill and are usually more expensive to hire.

South Korean oil companies are probably the world's ``biggest users'' of single-hull tankers, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said in an e-mailed note today. ``This might change policies in Korea and that would be tremendous for the market.''

The government will form a committee comprising oil-spill experts and seek help from residents of nearby regions to contain the slick, according to the statement. The vessel held 263,000 tons of crude oil and there were no casualties, it said.

The spill is the worst in South Korea's history and the biggest anywhere since the Tasman Spirit leaked about 27,000 tons of oil at the port of Karachi in Pakistan in July 2003, Tim Wadsworth, technical support manager for the International Tanker Owners Pollution Federation Ltd. in London, said by phone.

Barge Crashes

The oil leaked after a crane on the barge crashed into the Hebei Spirit at 7:15 a.m. local time, said Jeong Seong Mun, deputy director at the ministry's safety information center. The barge, owned by Samsung Heavy Industries Co., suffered minor damage, the ministry said in an earlier statement.

The leak is almost a third of the 37,000 tons spilled into Prince William Sound, Alaska, by the Exxon Valdez in 1989, according to data on the International Tanker Owners Pollution Federation's Web site.

Today's spill surpasses a 1995 accident in South Korean waters, when 5,000 tons of oil leaked at Yeosu, 455 kilometers south of Seoul. The country mobilized 166,905 people, 8,295 boats and 45 aircraft to contain the spill, which resulted in 9.6 billion won ($104 million) of economic losses, the ministry said in a statement.

The government has sent 30 patrol boats, 4 helicopters and 10 oil-spill control vessels to the site of the latest spill and is yet to assess its economic impact, said Lee Woo Sung, an official at the ministry.

Natural Resources

The environment ministry is studying what damage the spill may have caused, Cho Gyu Won, an assistant director at the ministry's natural resources division, said from Gwacheon, near Seoul.

The tanker was carrying crude oil for Hyundai Oilbank's refinery at Daesan, Kim Sung Yong, a spokesman for the company, said by telephone. South Korea's fourth-biggest oil refiner may reduce processing at its 390,000 barrels-a-day Daesan plant following the spill, said company officials who asked not to be identified.

Hyundai Oilbank's Kim said the crude-oil processing rate at the refinery remains unchanged at about 80 percent of capacity. The company is using its stockpiles and will ask state-run Korea National Oil Corp. for an emergency supply, if needed, he said.

The very large crude carrier, or VLCC, capable of carrying more than 2 million barrels of oil, is registered to Hong Kong- based Hebei Ocean Shipping Co., according to data compiled by Bloomberg. A man who answered the phone at the company's office wouldn't comment and declined to identify himself.

Single Hull

Of the eight VLCCs listed on Hebei Ocean's Web site, at least six are fitted with a single hull, according to the Lloyd's Register-Fairplay database.

The accident led owners of double-hull tankers to raise prices for leasing the vessels by 15 percent compared with benchmark prices yesterday, Charlie Fowle, a director at London- based shipbroker Galbraith's Ltd., said by phone today.

Contracts called forward freight agreements that indicate the future cost of shipping oil jumped by as much as 8 percent, according to Ben Goggin, head of tanker FFAs at broker London- based SSY Futures Ltd.

Teekay's Spin-Offs

Teekay Tankers' Taste of Success
Ruthie Ackerman
12.13.07
Forbes.com

Teekay Corp. thinks the whole is less than the sum of its parts.

The energy-based maritime conglomerate has spun off yet another one of its major operations. On its first day of trading Thursday, shares in Teekay Tankers (nyse: TNK) gained 4.0%, or 78 cents, to $20.28. Its initial public offering price of $19.50 per share was at the high end of the anticipated range.

The offering was of a 40% interest in Teekay Tankers; parent Teekay Corp. (nyse: TK) is retaining 60%.

Teekay also has spun off Teekay Offshore Partners (nyse: TOO), which specializes in fleets for storage of oil for offshore units, and Teekay LNG Partners (nyse: TGP), which operates vessels that carry liquified natural gas.

Since it began its spin-off program in May 2005, Teekay stock is up 28.5%. Teekay LNG is up 33.0% since it came public in May 2005, and Teekay Offshore has risen 20.2% since its debut in December 2006. By contrast, an index of energy-transport companies compiled by Revere Data has increased only about 11% since May 2005.


Charles W. Rupinski, an analyst at Maxim Group, said Teekay's tanker business is its most volatile one, and management probably thought it was dragging down the valuation of the company as a whole.

Even though spot rates are very high right now and Teekay has a lot of spot exposure, going forward the tanker business is facing many challenges and investors are likely to be cautious, Rupinski said.

Indeed, although the offering did well, investors put a significantly lower value on the spin-off than the parent. Using the pro forma earnings for last year provided by the Teekay Tankers offering document, the spin-off was valued at 9.2 times last year's income while the parent fetched 12.7 times last year's reported profit. The spin-off is planning to return a high proportion of its earnings to shareholders by way of dividends.

Teekay Tankers is getting nine double-hull Aframax-class tankers, which will be used for spot charters and short- or medium-term fixed-rate time-charter contracts. At the end of June, the ships, whose name derives from the acronym for average freight rate assessment and which are smaller than the oil supertankers that cannot make it into some harbors and canals, were worth about $275 million

Teekay Tankers raised about $180.8 million from the IPO after expenses and commissions. The proceeds will be used to partially repay Teekay for the inital fleet.

In addition, Teekay will give Teekay Tankers the opportunity to purchase up to to four Suez-max class tankers within 18 months. These ships are built to fit through the Suez Canal.

Asian Aframax Rate Gains Most Since 2005

Asian Aframax Rate Gains Most Since Feb. 2005 on Yearend Demand
By Katherine Espina
Dec. 12 (Bloomberg)

Asian aframax rates rose the most in two years and nine months, benefiting from higher costs for chartering bigger tankers and boosted by increased shipments for January ahead of the yearend holidays.

The rate to transport 80,000 metric tons of fuel from Kuwait to Singapore jumped 12 percent yesterday to Worldscale 233.75, according to the London-based Baltic Exchange. The gain is the biggest since Feb. 23, 2005, when the rate rose 16 percent. Shipping a ton of fuel on the route costs $19.94, based on Bloomberg data.

Hiring rates of supertankers, also known as very large crude carriers or VLCCs, on the Middle East to Far East routes have risen almost four percent since November, prompting charterers to split cargoes so smaller ships like suezmaxes and aframaxes can move them. Supertanker rates may extend gains after an oil spill in South Korea last week involving a single- hull vessel increased speculation of more demand for two-hull tankers.

``There is a knock-on effect from VLCC rates rising,'' Takeshi Ando at the tanker team of shipbroker Matsui & Co. in Tokyo said. ``Aframax owners don't like to offer below VLCC rates so I expect this sector will still go up,'' Ando said by phone.

The hiring rate for a supertanker on the Middle East-Japan route rose 5.5 percent yesterday to Worldscale 227.19, advancing more than fourfold since the start of the year, according to the Baltic Exchange's data. A supertanker on the Middle East-Singapore route gained 5.6 percent to Worldscale 231.56, its fourth day of gains.

Winter Demand

Aframax rates on the Middle East-Singapore route surged 4.5 percent last week, bringing gains in the past eight weeks to 78 percent, as transport demand rose to meet fuel needs for the Northern Hemisphere winter and shipowners passed on the additional costs from higher bunker prices.

Five aframaxes, capable of moving a total of 543,920 tons of fuel, are scheduled to arrive in Singapore this week while one with 113,013-ton capacity will arrive next week, according to Bloomberg data. That compares with three last week, with the capacity to haul a total of 309,880 tons of fuel.

The collision between a barge and the single-hulled supertanker Hebei Spirit on Dec. 7 in South Korea spilt 10,500 metric tons (78,750 barrels) of oil, the worst oil spill in the world in four-and-a-half years.

The following is a table of rates to charter smaller tankers capable of carrying less than 1 million barrels of crude oil or oil products on Asian routes as of Dec. 11, according to the Baltic Exchange.

--------------------------------------------------------------
Route Tons Rate Change Carrier
--------------------------------------------------------------
Kuwait-Singapore 80,000 233.75 +11.86% Aframax
Persian Gulf-Japan 75,000 209.17 +0.40% Oil Product Tanker
Singapore-Japan 30,000 312.50 0% Oil Product Tanker
Middle East-Japan 55,000 251.73 +0.23% Oil Product Tanker
--------------------------------------------------------------

Baltic Dirty Tanker Index through the roof

Well, it finally happened

A single-hull tanker spilled.

Freight Derivatives Surge After South Korea Oil Spill
By Alaric Nightingale
Dec. 7 (Bloomberg)

Forward freight agreements, contracts that traders buy and sell to bet on the future cost of shipping crude oil, surged after a single-hull tanker was involved in the worst spill in South Korea's history.

Contracts for January climbed as much as 8 percent while those for the first the three months of next year advanced 7 percent, according to Ben Goggin, head of tanker FFAs at SSY Futures Ltd. in London.

``All my sellers from yesterday have turned buyers this morning,'' he said by telephone today. ``This could push rates much higher.''

The Hebei Spirit spilt 10,500 metric tons of crude oil about 5 kilometers (3.1 miles) off the coast of South Korea after it was struck by a crane on a barge. Should South Korea respond by banning such single-hull ships from its waters, it would be ``tremendous'' for the tanker market, Per Mansson, a shipbroker at Nor Ocean Stockholm AB, said in an e-mailed note today.

Modern tankers are fitted with two hulls to cut the risk of an oil spill and usually cost more to hire.

Contracts that indicate the cost of shipping crude in January climbed to 140 Worldscale points, from 130 yesterday, Goggin said. FFAs for the first quarter of next year rose to 120 Worldscale points from 112 points.

$108,000 a Day

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Based on 2007 flat rates, owners of very large crude carriers, or VLCCs, would earn about $108,000 a day for leasing out vessels at a rate of 140 Worldscale points, a formula from Oslo-based shipbroker RS Platou AS and marine-fuel prices compiled by Bloomberg showed. Earnings will turn out to be higher than that because 2008's flat rates will be raised to reflect this year's record refueling costs.

``If it's proved that a double hull would have avoided the spill, then I think it will have huge ramifications,'' Charlie Fowle, a director at Galbraith's Ltd., a London-based shipbroker, said in an interview. ``Everybody will be clamoring for double- hulls.''

Frontline Shares Fall As Contract Ends

Frontline Shares Fall As Contract Ends
Associated Press
12.04.07
Forbes.com

Shares of Frontline Ltd. slipped in trading Tuesday, after a JPMorgan analyst reduced his 2008 earnings estimates to reflect the oil tanker operator's expected losses from the end of two long-term charter agreements.

Frontline (FRO) said earlier Tuesday it ended deals for two vessels with Ship Finance International Ltd. (SFL ), which then sold the tankers for $40 million each. Frontline expects $32.8 million for the contract's early termination.

Analyst Jonathan B. Chappell cut his 2008 profit estimate to $2.55 per share from $2.70 per share, saying the company "continues to trade short-term gains for long-term earnings losses."

He reiterated his "Underweight" rating for Frontline, and suggested the stock should underperform other tanker operators for the next nine months to a year.

Shares of Frontline fell $1.76, or 3.9 percent, to close at $42.87. The stock has ranged between $29.35 and $53.09 in the past year.

Chappell also lowered 2008 profit estimate on Ship Finance to $1.77 per share from $1.96 per share.

However, Chappell said that unlike Frontline, he expects Ship Finance to use the sale's proceeds to diversify and expand its fleet outside of the struggling tanker market.

He maintained his "Overweight" rating.

Ship Finance shares fell 57 cents to $24.64.

Nokta and Chappell in 2006

Around the Markets: Rising tide lifts stock of cargo firms
By Dune Lawrence
JULY 11, 2006
International Herald Tribune

NEW YORK: As U.S. stocks sank in May and June, shares of oil tanker companies like Teekay Shipping proved buoyant, outperforming the Standard & Poor's 500 index by 17 percentage points.

The surge reverses 18 months of underperformance and may mean further gains to come, as share prices play catch-up to profit growth, with the added luster of dividends that outstrip even high- yielding utilities. The companies themselves also consider their stock cheap, if $1.31 billion in buybacks in the past year is any indication.

"As an investor, you want to buy when things are bleak, and these things have been pretty bleak," said J.C. Waller, who manages the Icon Energy Fund. "When you find that combination of value, dividend yield and price appreciation coming from where these things have been, you can't ignore it."

The Bloomberg tanker index jumped 14 percent from the end of April through June 30, as daily rates for the largest carriers reached a four-month high in what is usually a period of price declines. The S&P 500 slipped 3.1 percent in that same period. Overseas Shipholding Group, the biggest U.S.-based owner of oil tankers, led the advance with a 21 percent gain. Teekay climbed 8.8 percent.

The tanker index touched its low point for the year in mid-April, 32 percent below its record high of November 2004. Even after rebounding, its price stands at 8.2 times earnings over the past 12 months, compared with 13.4 when the index peaked. The S&P 500 trades at 17 times earnings.

whose fund has outperformed 80 percent of similar funds over the past five years, estimates that an S&P index of tanker and pipeline stocks is 22 percent undervalued.

"They've gotten so low that there's not a whole lot of downside," said Malcolm Polley at S&T Wealth Management Group. Polley started buying Frontline and General Maritime in February.

And business is improving in the industry. Freight rates for the class of ships known as very large crude carriers, which can carry two million barrels of oil, on routes from the Gulf to the United States and to Japan have climbed 25 percent and 52 percent, respectively, since April.

Earnings have held up better than many analysts predicted this year. First-quarter profit at all six members of the tanker index exceeded the estimates of analysts.

Omar Nokta, an analyst at Dahlman Rose, an investment bank that specializes in shipping and energy companies, raised his earnings predictions for some tanker stocks twice in June. Constraints in the supply of tankers, and the need to lock in oil contracts further in advance, will support earnings growth and cash flow and justify higher share prices, he said.

Nokta raised his 2006 profit projection for Teekay, the world's largest oil tanker owner, to $4.79 a share from $3.98. He expects Overseas Shipholding Group to earn $10.24 a share, up from $8.31.

"If you buy now, you get this awesome run for the fourth quarter," said Nokta. "Most of the Street hasn't changed their estimates yet, not even for the current environment."

Some analysts say that the higher rates, and the rally, will not last. They warn that the stocks' low valuations reflect the risk of investing in an industry where rates and earnings fluctuate rapidly.

Jonathan Chappell at J.P. Morgan Chase in New York attributed the June rate surge to short-term factors including the use of some tankers as storage by Iran and Saudi Arabia.

"Everything else, from inventories to demand estimates to the number of ships that have been removed this year, points to a bearish market," Chappell said.

The share prices also reflect concern that there are too many new tankers being built as estimates for the growth in demand for oil decline. The International Energy Agency expects demand to increase 1.8 percent this year, compared with a peak of 3.8 percent in 2004.

Tanker demand will increase 3.8 percent in 2006 through 2008, compared with fleet growth of 5.4 percent, according to a June estimate by shipping analysts at Jefferies in Houston.

Omar Nokta upgrades FRO, OSG, NAT

Oil Tankers Owe Strength to OPEC
Ruthie Ackerman
11.26.07
Forbes.com

Increased oil production has sent spot charter rates surging on oil tankers in the last week, helping to keep the stocks of crude oil tankers and operators above water.

On Monday, Dahlman Rose & Co. analyst Omar Nokta, upgraded three tanker companies because they are the most exposed to the strong spot rates. Nokta raised his rating on Frontline, Overseas Shipholding Group, and Nordic American Tanker Shipping to “buy” from “hold” and reiterated his “buy” rating on General Maritime, Tsakos Energy Navigation, Ship Finance International, and Omega Navigation Enterprises.

But even with the upgrade oil tanker stocks were a mixed bag at the close on Monday, indicating investors didn't share Nokta's optimism.

Notka said the spot rates on the Very Large Crude Carriers, or VLCC’s, have jumped in the Arabian Gulf in the past few days. Last week, VLCC’s averaged $33,000 per day. On Monday morning they spiked to $84,000 per day, a level not seen since August 2006. The number of vessels being chartered has jumped significantly, limiting the supply of ships, Nokta said.

The strength in the oil tanker market has spread to West Africa and the Mediterranean as well, he added.

The problem for oil tanker lines over the last year has been that the supply of ships outstripped the demand for oil. With oil prices at record highs since OPEC's production cut in Nov. 2006, demand for oil tankers fell.

But Nokta believes the strong demand for oil tankers over the last few weeks is a result of increased production from the Organization of Petroleum Exporting Countries. As global oil stock levels have fallen over the past six months, OPEC has been under pressure to increase production. OPEC appears to have raised production by 750,000 barrels, Nokta said, which is more than the 500,000 barrel boost it previously announced.

Nokta believes the increased production is a sign that a formal boost should come when OPEC meets on Dec. 5. With gasoline, U.S. heating oil, and crude oil stockpiles down substantially there should be a significant amount of imports through the winter and into the spring, boosting the demand for oil tankers, Nokta said.

The conversion of 60 VLCCs into dry bulk carriers for 2008 and 2009 should offset a significant number of the 36 new VLCCs being built and the 69 more being delivered in 2009. With increased production in the Arabian Gulf demand will increase helping the tanker market to outperform expectations, Nokta said.

Route Rates 3 - Test

route	class	size	Days	WS	TCE - equiv	breakeven	Date
TD1	VLCC	280 kmt	64 days	120.00	$xx,000	$30,000	Nov. 29th
TD2	VLCC	260 kmt	xxxx	185.00	$130,000+	$30,000	Nov. 29th
TD3	VLCC	250 kmt	38 days	182.50	$130,000+	$30,000	Nov. 29th
TD4	VLCC	260 kmt	xxxx	135.00	$xx,000	$30,000	Nov. 29th
TD5	Suezmax	130 kmt	xxxx	200.00	$27,406	$22,100	Oct. 23rd
TD6	Suezmax	135 kmt	xxxx	155.68	$63,000	$22,100	Oct. 23rd
TD7	Aframax	80 kmt	xxxx	150.00	$xx,000	xx,000	Nov. 29th
TD8	Aframax	80 kmt	xxxx	190.00	xxx	xxx	Nov. 30th
TD9	Aframax	70 kmt	xxxx	170.00	$x,000	$xx,000	Nov. 29th
TD10	Panamax	50 kmt	xxxx	215.00	$xx,000	xx,000	Nov. 28th
TD11	Aframax	80 kmt	xxxx	120.45	$18,613	$15,000	Oct. 11th
TD12	Panamax	55 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD14	Aframax	80 kmt	xxxx	180.00	xxx	xxx	Nov.29th

---	From	To	Size	Class
TD1	MEG	USG	280,000mt	VLCC
TD2	MEG	Singapore	260,000mt	VLCC
TD3	MEG	Japan	250,000mt	VLCC
TD4	WAF	USG	260,000mt	VLCC
TD5	WAF	USAC	130,000mt	Suezmax
TD6	Black Sea	Mediterranean	135,000mt	Suezmax
TD7	North Sea	Eur Continent	80,000mt	Aframax
TD8	Kuwait	Singapore	80,000mt	Aframax
TD9	Caribbean	USG	70,000mt	Aframax
TD10	Caribbean	USAC	50,000mt	Panamax
TD11	Mediterranean	Mediterranean	80,000mt	Aframax
TD12	Antwerp	Houston	55,000mt	Panamax
TD14	Indonesia	Japan	80,000mt	Aframax

updated Nov. 30th

Dahlman Rose Upgrades FRO and OSG

Crude Oil Declines as Reports Show OPEC Production Increase
By Mark Shenk
Nov. 26 (Bloomberg)

Crude oil fell on speculation that OPEC is increasing production to reduce record prices and keep the global economy from slowing.

The 12 members of the Organization of Petroleum Exporting Countries will probably increase output 1.1 percent to 31.6 million barrels a day this month, according to preliminary estimates by PetroLogistics Ltd. OPEC agreed in September to raise production targets for the 10 members with quotas by 1.9 percent starting Nov. 1.

``The Petrologistics numbers are showing a good-size build in OPEC output,'' said Tim Evans, an analyst with Citigroup Global Markets Inc. in New York. ``Most of the increase is from Iraq, which is fairly encouraging.''

Crude oil for January delivery fell 48 cents, or 0.5 percent, to settle at $97.70 a barrel at 2:44 p.m. on the New York Mercantile Exchange. Futures touched $99.11 today, the highest since reaching a record $99.29 on Nov. 21. Oil futures trading began in 1983. Prices are up 65 percent from a year ago.

Iraq, which last month resumed exports from Kirkuk through its northern pipeline network, will make the biggest contribution to the supply increase, raising output by 20 percent to 2.15 million barrels a day, according to PetroLogistics, which assesses supply by tracking tankers.

Iraqi Recovery

``This is the highest we've seen since the U.S. invasion in 2003 and may be a sign that the Iraqi oil industry is finally recovering,'' said Evans.

Iraqi production has yet to recover from the unrest that followed the U.S.-led invasion in March 2003. Iraq produced 2.48 million barrels a day in February 2003, the last month before the invasion. The Persian Gulf country has the world's third-biggest proved oil reserves, according to BP Plc.

Saudi Arabia is producing more than 9 million barrels a day, CNBC reported, citing unidentified people at the Saudi oil ministry. The country, which is OPEC's largest producer and the world's top oil exporter, pumped an average 8.75 million barrels a day in October, the highest since November 2006, a Bloomberg News survey showed.

Prices also fell on signs that slowing economic growth in the U.S., Europe and Japan will curb fuel consumption. Investor optimism about financial markets in the U.S., which consumes a quarter of the world's oil, fell this month to the lowest in two years after concern grew that the country is heading toward a recession, according to a UBS AG poll.

The UBS/Gallup Index of Investor Optimism dropped to 44 in November from 70 last month. The sentiment gauge declined to the lowest level since Hurricane Katrina struck the U.S. Gulf Coast and is down from a three-year high of 103 in January.

Frontline Ltd., the world's biggest supertanker operator, and Overseas Shipholding Group Inc. had their ratings raised by Dahlman Rose & Co. because of increasing OPEC shipments. Ship- hire rates on tankers sailing to Asia from the Middle East, the world's busiest market for supertankers, more than doubled since Nov. 9, according to data from the London-based Baltic Exchange. Dahlman is an investment bank that specializes in marine transport companies and related industries.

OPEC will load 24.5 million barrels a day onto tankers in the four weeks to Dec. 8, compared with 23.8 million barrels in the month ended Nov. 10, Oil Movements said on Nov. 22. It will be OPEC's 14th consecutive weekly increase and the biggest this year, according to the company, which tracks shipments.

Upcoming Meeting

The group, which produces more than 40 percent of the world's oil, is scheduled to discuss crude-oil production for the first quarter of 2008 at a meeting in Abu Dhabi on Dec. 5.

``We are primed to make another run for $100,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis. ``There's a good shot we will make it this time but once that occurs there is no telling what will happen.''

The dollar dropped to a record low against the euro earlier today on concern U.S. credit-market losses may prompt the Federal Reserve to keep reducing interest rates. The U.S. currency recovered against the euro later in the session.

``On one hand there's growing evidence that demand will drop,'' Wittenauer said. ``Economic concerns are being reflected in a number of markets. At the same time, we are seeing weakness in the dollar, which tends to push commodity prices higher.''

Persian Gulf Rates Surge Most in Three Years

Persian Gulf Oil-Tanker Rates Surge Most in Almost Three Years
By Alaric Nightingale
Nov. 23 (Bloomberg)

The cost of shipping Middle East crude oil to Asia, the world's busiest market for supertankers, climbed by the most in almost three years as demand eliminated a glut of ships that were competing for cargoes.

Hire rates for the key benchmark voyage to Japan climbed 29.5 percent today, the biggest one-day increase since Jan. 30, 2005, according to data from the London-based Baltic Exchange.

Supply of tankers to load in the first half of December is getting ``tighter and tighter,'' Atsuto Otani, a London-based broker at Galbraith's Ltd., said by phone today. ``Sometimes when cargoes rush into the market, charterers just panic and pay up.''

PTT Pcl, Thailand's biggest energy company, hired the vessel Asian Progress II at a rate of 134 Worldscale points, Oslo-based shipbroker PF Bassoe A/S said in a report today. The Baltic Exchange's benchmark rate for a comparable voyage to Singapore rose to 130 points.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 130 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $85,498 a day on a 25- day round trip from Saudi Arabia to Singapore, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

`Plenty' of Vessels

Gains may be tempered once refineries start booking ships to load after Dec. 20 when ``plenty'' of vessels will become available, Otani said. Out of the 64 tankers so far hired to load in December, none have been arranged to load after the 20th of the month, Paris-based shipbroker Barry Rogliano said in an e- mailed report today.

There are 52 carriers available for hire up to Dec. 23, according to Barry Rogliano. That compares with 52 likely outstanding cargoes for the remainder of the month.

Demand for crude oil will rise 2.8 percent in the first quarter of 2008, the biggest year-on-year gain since the first three months of 2005, according to data from the Paris-based International Energy Agency.

Frontline Ltd., the world's biggest VLCC operator, said Nov. 15 it needs $30,000 a day to break even on each of its supertankers.

Bookings for VLCCs sailing from the Middle East to Asia account for 47 percent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners LLP. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.

Asian Aframax Rates May Rise a Sixth Week on December Cargoes
By Katherine Espina
Nov. 23 (Bloomberg)

Asian aframax rates may extend gains for a sixth week on increased demand for December cargoes before the Northern Hemisphere winter.

The rate to transport 80,000 metric tons of fuel from Kuwait to Singapore, the world's fourth-busiest route for such ships, rose 0.9 percent to Worldscale 148.86 yesterday, the highest since July 3, according to the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $13.96, based on Bloomberg data.

Aframax rates on the Middle East-Singapore route have gained 27 percent in the past five weeks, boosted by higher bunker prices and shipments of November cargoes. The surge in rates of supertankers, also known as very large crude carriers or VLCCs, may boost charter fees of smaller ships like aframaxes.

The hiring rate of supertankers for the benchmark voyage to Japan climbed 20 percent yesterday, the biggest one-day increase since March 11, 2005, according to data from the Baltic Exchange. A supertanker can transport 2 million barrels of oil.

``The jump in the VLCC market will initially boost sentiment,'' Channa Munasinghe, director at Singapore-based shipbroker Alliance Tanker Chartering Pte, said in a phone interview today. Cargoes for supertankers may eventually be split for transport into smaller vessels.

That ``could potentially create a jump, not immediately but in about two to three weeks,'' Munasinghe said. Rates for aframaxes may rise 5 to 10 points next week, he said.

Exxon Mobil

``The stronger VLCC market should in turn lead to an improved sentiment for smaller tanker tonnage,'' Henrik With and Glenn Lodden, analysts at Oslo-based DnB NOR Markets, said in a weekly report.

Four aframaxes, which are able to transport a combined 439,703 deadweight tons of cargo, are scheduled to arrive in Singapore this week, and one, capable of moving 98,570 tons, next week, according to Bloomberg data.

Exxon Mobil Corp. hired the tanker Aegean Harmony to transport 90,000 tons of fuel oil on Nov. 22 at the rate of Worldscale 170, Seatown Shipbroking Pte in Singapore said in a report today.

At that rate, moving 80,000 tons of fuel oil will cost Worldscale 151.10, a 1.5 percent premium to prices quoted on the Baltic Exchange for the Middle-East to Singapore route.

The double-hulled Aegean Harmony was built in 2007 by South Korea's Samsung Heavy Industries Co., according to Bloomberg data. Exxon is the world's largest oil company.

Southeast Asia is the world's busiest aframax market after the Mediterranean. The Caribbean is the third busiest.

Earnings Releases Third Quarter 2007

Arlington	ATB	Oct. 23rd	loss
Overseas	OSG	Oct. 29th	profit falls 71%
General Maritime	GMR	Oct. 31st	profit falls 54%
Teekay	TK	Oct. 31st	profit falls 78%
Tsakos	TNP	Nov. 5th	profit rises
Top Tankers	TOPT	Nov. 9th	loss
Nordic American	NAT	Nov. 5th	loss
Double Hull	DHT	Mon, Nov. 19	???
Knightsbridge	VLCCF	Fri, Nov. 30th	confirmed
Ship Finance	SFL	Nov. 15th	profit falls 55%
Frontline	FRO	Nov. 15th	profit falls 78%
Euronav	[Europe]	Oct. 23rd	loss
MISC	[Malaysia]	Date	Result
---	---	---	---

updated Nov 18th

Ship Finance 3Q Profit Falls 55 Percent

Ship Finance 3rd-Qtr Profit Falls 55 Percent As Revenue Falls Faster Than Expenses
November 15 (AP)

Ship Finance International Ltd. said Thursday its net income fell more than half in the third quarter, as revenue fell at a higher rate than expenses and its spot-tanker business delivered lower profits.
Profit fell 55 percent to $20.6 million, or 28 cents per share, from $45.7 million, or 63 cents per share, a year earlier. Revenue fell 23.3 percent to $93.4 million from $121.8 million.

Analysts polled by Thomson Financial expected earnings of 43 cents per share on revenue of $97.5 million, on average.

Though operating expenses also fell, they used up about 36 percent of revenue last quarter compared with 29 percent in the year-ago period. Results also included a loss of $7.2 million or 10 cents per share, from a noncash accounting adjustment.

The company also said the spot-tanker market has been "substantially weaker" and negatively impacted earnings.

Ship Finance shares fell 55 cents, or 2.1 percent, to $25.80 in afternoon trading.

Frontline Third-Quarter Profit Falls 76%

Frontline Third-Quarter Profit Tumbles on Hire Rates
By Alaric Nightingale
Nov. 15 (Bloomberg)

Frontline Ltd., the world's biggest operator of supertankers, said third-quarter profit tumbled 76 percent as it leased out ships for less and fuel costs surged.

Net income fell to $24.2 million, or 32 cents a share, from $98.8 million, or $1.32, a year earlier, Hamilton, Bermuda-based Frontline said in a statement to the Oslo stock exchange today. That missed the $40 million, or 53-cents-a-share, median estimate of seven analysts surveyed by Bloomberg.

Refineries are cutting crude-oil imports because of reduced processing margins, Frontline said. At the same time, fuel costs for shipping lines are increasing as oil prices reach a record. Tanker-rental rates also shrank because of the ``high availability'' of ships, the company said.

``They are hardly making any money,'' said Siri Evjemo Nysveen, a broker at Kaupthing Ltd. in London, who until September covered Frontline as an analyst at the bank. ``This is a very negative report.'' The company may be forced to cut its profit outlook for 2008, she said.

The shares closed down 3.5 kroner, or 1.6 percent, to 213 kroner in Oslo trading, the lowest since April 26. The slide pared the stock's advance this year to 19 percent, valuing the company at 15.9 billion kroner ($2.9 billion).

Earnings from Frontline's very large crude carriers, or VLCCs, declined 39 percent to $36,000 a day, while those from its 1 million-barrel carriers declined 37.5 percent to $25,000 a day. Breakeven levels are $30,000 and $22,100 respectively.

Independent Tankers

Frontline's third-quarter sales slumped 32 percent to $276 million. Profit included a gain of $4.8 million on the sale of the tanker Front Horizon. Excluding that transaction, net income was $19.3 million, less than the $28 million, or 38.5-cent-a- share, median estimate from 10 analysts.

The company is continuing to investigate ``alternatives and options'' for its Independent Tankers Corp., a Cayman Islands- based business that owns 10 tankers leased out on fixed-rate charters to BP Plc and Chevron Corp., Chief Executive Officer Bjoern Sjaastad said on a conference call today.

Frontline would have to make a deal with bondholders and the oil companies who are leasing the ships before it could sell the company or the vessels it owns, Sjaastad said. ITC's outstanding debt is $469.7 million and it is paying an 8.5 percent interest rate to finance its ships.

Tanker Sale

Operating performance in the final three months of the year will be ``in line'' with the third quarter, Frontline said. Net income will be buoyed by the sale of shares of Imarex NOS ASA, an Oslo-based derivatives broker, and Dockwise Ltd., a company that hauls oil rigs.

World oil demand will rise 2.3 percent next year, Frontline said, citing data from the International Energy Agency, an adviser to 26 nations.

The carrying capacity of the global fleet of VLCCs will climb almost 6 percent to about 156.5 million tons in 2008, from about 148 million tons at the end of this year, according to estimates from London-based shipbroker Galbraith's Ltd.

The Galbraith's assessment assumes 40 new VLCCs will enter service next year, each with a capacity of about 310,000 tons, and 15 carriers that can each haul about 260,000 tons will be switched to other trades.

At least 38 VLCCs will be converted to ``non-trading purposes'' worldwide by the end of 2008, Frontline said today. Of those ships, 90 percent will become iron-ore carriers, and 10 percent will be turned into storage and production vessels.

The company plans a dividend of $1.50 a share for the third quarter. Frontline has said it plans to pay about 100 percent of profits to shareholders in the form of dividends.

About 40 percent of Frontline's fleet is protected from possible declines next year in the single-voyage, or spot, market through shipping contracts with oil companies that pay a fixed daily amount.

Baltic Dirty Tanker Index

Six Month Chart

Top Tankers Q3 loss widens

Top Tankers Q3 loss widens; shares hit year-low
Nov 8th, 2007
(Reuters)

Top Tankers Inc. (TOPT), which transports refined petroleum products and crude oil, reported a wider third-quarter loss on lower demand and rates for its vessels, sending shares down as much as 12 percent to a new year-low.

Prolonged warm weather in most parts of Europe and the United States, higher-than-anticipated fuel-oil inventories at the beginning of the period and constant rise of oil prices, led to a softer demand for crude oil during the quarter, the Greek company said.

Total available ship days fell to 1,987 during the latest third quarter, from 2,484 in the year-ago quarter. Total average time charter equivalent fell 20 percent to $22,467 per ship per day.

For the third quarter, the company reported a net loss of $18.4 million, or 50 cents a share, compared with a net loss of $11.4 million, or 35 cents a share, in the same quarter last year.

Voyage revenue fell 27 percent to $51.2 million.

Analysts on average were expecting the company to post a loss of 41 cents a share, before special items, on revenue of $46.3 million.

The stock was trading down 5 percent at $4.79 in late morning trade on the Nasdaq, after hitting a low of $4.41 earlier in the session. (Reporting by Hezron Selvi in Bangalore; Editing by Gopakumar Warrier)

Nordic American posts third quarter loss

Nordic American to buy two new vessels, posts loss
Nov 5th, 2007
(Reuters)

Oil tanker operator Nordic American Tanker Shipping Ltd (NAT) on Monday said it will buy two new vessels for $90 million each.

The company said the two suezmax new-buildings are expected to be delivered in the fourth quarter of 2009 and by April 2010. Nordic American said the transactions will be financed by borrowings under its $500 million credit line.

The company also posted a third-quarter loss of $1.2 million, or 4 cents a share, compared with net income of $20.3 million, or 97 cents a share a year earlier.

Tsakos third quarter profit rises

Tsakos Energy Navigation 3rd-Quarter Profit Increases on Larger Fleet, Capital Gains
Nov 5th, 2007
(AP)

Greek tanker owner Tsakos Energy Navigation Ltd. reported higher third-quarter net income Monday as an expanded fleet and a large capital gain lifted earnings above Wall Street expectations.

Net income for the three months ended Sept. 30 rose to $50 million, or $2.61 per share, from $44.5 million, or $2.33 per share, during the same period a year earlier. The latest quarter included capital gains of $31.8 million, compared with similar gains of just $13.3 million a year ago.

Revenue increased to $122.5 million from $115.2 million a year ago.

Analysts polled by Thomson Financial forecast earnings excluding items of $1.12 per share on revenue of $106 million.

Tsakos' fleet grew to an average of 43.6 vessels during the quarter, compared with 37.1 a year ago. That increased revenue after commissions and costs by 3.9 percent, the company said, though depreciation and financing costs also increased.

The company did say its time charter equivalent per ship per day was $26,467 in the third quarter of 2007, down from $29,779 in the third quarter of 2006.

Tsakos said that though the seasonally weak third quarter, when refiners scale back crude demand ahead of the switch-over to heating oil, has ended, spot rates for both crude and product tankers have not yet reached the levels typically expected for the seasonally strong fourth quarter.

Tsakos shares rose $3.58, or 5.4 percent, to $69.56 in midday trading.

Teekay third quarter profit falls 78%

Teekay third-quarter profit falls as rates drop
Oct 31
(Reuters)

Oil tanker operator Teekay Corp (TK) said on Wednesday its quarterly profit fell as tanker charter rates and tanker freight rates declined.

The company said net income fell to $17 million, or 23 cents per share, from $79.8 million, or $1.07 per share, in the same period a year ago.

Seasonal oil field maintenance in the North Sea, and hurricane-related oil field outages led to lower oil export volumes and lower rates, the company said.

Net revenue rose to $462.3 million from $344.3 million in the third quarter a year earlier, the company said.

GMR third quarter profit falls 54%

GMR Announces Third Quarter Results

Oct. 31
PRNewswire-FirstCall

General Maritime Corporation today reported its financial results for the three and nine months ended September 30, 2007.

Financial Review: 2007 Third Quarter

The Company had net income of $10.9 million, or $0.36 basic and $0.35 diluted earnings per share, for the three months ended September 30, 2007 compared to net income of $24.0 million, or $0.78 basic and $0.76 diluted earnings per share, for the three months ended September 30, 2006. The decrease in net income was principally the result of lower voyage revenues attributable to a generally lower rate environment in the third quarter of 2007. The impact of lower rates on the Company was mitigated by the Company's increased time charter coverage at rates above current spot rates. Results for the 2007 period also reflected higher interest expense due to increased borrowings to fund our $15.00 special dividend in March 2007 and increased off-hire days due to longer then anticipated drydockings and one accelerated drydocking in the third quarter of 2007.

Peter C. Georgiopoulos, Chairman, Chief Executive Officer and President, commented, "During the third quarter of 2007, we continued to benefit from the strategic decision we made over a year ago to place a significant portion of our fleet on accretive time charters. The considerable success we have had in this important area is testimony to our strong reputation in the industry and unrelenting focus on effectively managing the Company's assets through the shipping cycles. Complementing our solid results for the third quarter, we declared a third quarter dividend of $0.50 per share, our third consecutive dividend under the Company's fixed annual dividend of $2.00 per share. Including this quarterly dividend and the $15 special dividend we paid on March 23, 2007, General Maritime has distributed dividends of $24.78 per share to shareholders since 2005. With 70% time charter coverage for our fleet on the water, we have contracted revenues of $191.8 million for 2008, which positions the Company well for our $2.00 fixed dividend target while maintaining upside potential to benefit from any rate increases in the future."

Included in net income of $10.9 million are a $3.4 million unrealized non- cash gain associated with the change in fair value of our freight derivative as well as a $1.3 million gain associated with monthly cash settlements of our freight derivative, both of which are included in Other (income) expense.

Net voyage revenue, which is gross voyage revenues minus voyage expenses unique to a specific voyage (including port, canal and fuel costs), decreased 12.2% to $49.1 million for the three months ended September 30, 2007 compared to $55.9 million for the three months ended September 30, 2006. EBITDA for the three months ended September 30, 2007 was $31.0 million compared to $34.0 million for the three months ended September 30, 2006 (please see below for a reconciliation of EBITDA to net income). Net cash provided by operating activities was $18.5 million for the three months ended September 30, 2007 compared to $15.6 million for the prior year period.

The average daily time charter equivalent, or TCE, rates obtained by the Company's fleet decreased by 15.9% to $30,176 per day for the three months ended September 30, 2007 from $35,886 for the prior year period. The Company's average rates for vessels on spot charters decreased by 51.9% to $18,246 for the three months ended September 30, 2007 compared to $37,994 for the prior year period.

Total vessel operating expenses, which are direct vessel expenses and general and administrative expenses, increased 7.1% to $22.6 million for the three months ended September 30, 2007 from $21.0 million for the three months ended September 30, 2006. Direct vessel operating expenses increased 15.5% to $12.7 million from $11.0 million, while general and administrative expenses remained flat at $9.9 for the same periods. The average size of General Maritime's fleet increased 7.8% to 19.4 vessels in the third quarter of 2007 from 18 vessels in the prior year period. On a daily basis, direct vessel operating expenses increased 7.2% to $7,125 during the quarter ended September 30, 2007 compared to $6,645 for the prior year period. This increase can be attributed to cost associated with bringing the technical management of two of our Aframax vessels in-house and the write off of certain expenses reflecting insurance claim deductibles as well as increased premiums reflecting the increased value of our fleet.

Financial Review: Nine Months 2007

Net income was $39.4 million or $1.29 basic and $1.25 diluted earnings per share, for the nine months ended September 30, 2007 compared to $134.4 million, or $4.24 basic and $4.13 diluted earnings per share, for the nine months ended September 30, 2006. Net voyage revenues decreased 16.0% to $161.9 million for the nine months ended September 30, 2007 compared to $192.9 million for the nine months ended September 30, 2006. EBITDA was $91.6 million for the nine months ended September 30, 2007 compared to $165.0 million for the nine months ended September 30, 2006. Net cash provided by operating activities was $79.6 million for the nine months ended September 30, 2007 compared to $135.4 million for the prior year period. TCE rates obtained by the Company's fleet decreased 4.4% to $33,002 per day for the nine months ended September 30, 2007 from $34,508 for the prior year period. Total vessel operating expenses remained relatively flat at $70.3 million for the nine months ended September 30, 2007 compared to $70.7 million for the prior year period, and daily direct vessel operating expenses rose 9.3% to $6,777 for the nine month period ending September 30, 2007 from $6,203 from the prior year period.

OSG Q3 Profit Falls 71%

Overseas Shipholding Third-Quarter Profit Falls 71%
By Todd Zeranski
Oct. 29 (Bloomberg)

Overseas Shipholding Group, the largest U.S.-based oil tanker owner, said third-quarter profit fell 71 percent as the company was paid less for oil deliveries.

Net income declined to $26.6 million, or 83 cents a share, from $90.8 million, or $2.29, a year earlier, the New York-based company said in a statement today. The average estimate of 12 analysts surveyed by Bloomberg was 70 cents a share. Revenue rose 4.3 percent to $277.2 million.

Shipping rates have fallen 19 percent this year, according to the Baltic Dirty Tanker Index. The decline is due at least partly to ship supply outpacing crude-oil demand. While the size of the world fleet expanded 3.8 percent, demand increased 1.7 percent, according to the International Energy Agency.

``They're going to have a tough couple of quarters, this and next,'' Natasha Boyden, a Cantor Fitzgerald LP analyst, who has a ``buy'' rating on the stock, said. ``The rates haven't rebounded like we thought they would. Weather hasn't been helpful, and that's usually the biggest driver.''

Overseas Shipholding was unchanged at $69.21 in New York Stock Exchange composite trading. The stock has risen 23 percent this year.

Profit included a gain from sales of vessels of $1.5 million, or 5 cents a share. The year-ago quarter had a gain of $15.8 million, or 39 cents.

Oil is up 53 percent in 2007 and reached a record $93.80 a barrel in New York Mercantile Exchange trading today.

Tanker Fleet

The world fleet will increase by as much as 32 percent during the next five years, estimates Lloyd's Register-Fairplay, the company that assigns ship registration numbers.

``We hope we would see asset values come down, as rates have been depressed for several quarters,'' Boyden said. Overseas Shipholding ``would like to see that, because they would be able to buy.''

Last month, Overseas Shipping said it would add four Suezmax carriers, which can each transport 1 million barrels of oil, to its fleet. The company owned or operated 51 crude-oil tankers at the end of the quarter, including 20 very large crude carriers, or VLCCs, which can carry 2 million barrels of oil.

The company has booked 44 percent of the fourth quarter for its VLCCs at an average rate of $25,500 a day. For its Aframax tankers, which can transport 600,000 barrels of oil, it has booked 13 percent of the quarter at a spot charter rate of $17,000 a day.

VLCC Fleet

The company's VLCCs operate mainly out of the Persian Gulf on routes to Asia and the U.S. The tanker owner said it was paid an average of $34,802 a day for its VLCCs in the quarter, a 50 percent decrease. Its break-even point for VLCCs is $17,400.

Its Aframax tankers earned an average spot rate of $24,614, from $34,952 a day a year earlier, a 30 percent decline.

Overseas Shipholding's U.S.-flag fleet ships crude oil and refined products between U.S. ports under the Jones Act, a 1920 law that requires commercial vessels operated between U.S. ports to be built in the U.S., crewed by Americans and owned by an American company.

Revenue for its U.S. fleet nearly tripled to $53.8 million.

Tanker Fleets

Company Fleets [Draft]

625 pixels - 10 columns - 8pt (reset font)

Company	ticker	vessels	dwt*	VLCC	Suezmax	Aframax	Panamax	Product	LNG
Teekay	TK	159	7.73	1	25	46	0	30	7
Frontline [2]	FRO	59	14.70	39	20	0	0	0	0
Overseas	OSG	108	8.15	20	0	20	11	34	0
Ship Finance [2]	SFL	37	9.60	27	10	0	0	0	0
Tsakos	TNP	43	3.04	3	10	8	0	21	1
General Maritime	GMR	19	2.15	0	9	10	0	0	0
Top Tankers	TOPT	23	1.95	0	13	0	0	10	0
Knightsbridge	VLCCF	5	1.50	5	0	0	0	0	0
Double Hull [1]	DHT	8	1.37	3	1	4	0	0	0
Nordic American	-----	12	1.80	0	12	0	0	0	0
Arlington	ATB	9	7.00	2	0	0	2	5	0
-----	-----	-----	---	--	--	--	--	--	--
Euronav	[Eur]	32	dwt	15	15	2	0	0	0
MISC (Malaysia)	-----	45	dwt	8	0	31	0	6	23
Total	-----	vessels	dwt	96	126	86	13	100	31

updated October 2007
[1] DHT tankers chartered in from OSG
[2] Many ships are in both FRO and SFL fleets, SFL charters to FRO.

* million deadweight tons. This number is an estimate based only on the crude tankers in the fleets. Product carriers, LNG carriers, and any other vessels are not included. 300,000 dwt per VLCC; 150,000 dwt per Suezmax; 80,000 dwt per Aframax; and 50,000 dwt per Panamax - regardless of actual individual tanker specifications. This number should only be used as an estimate of total capacity.

Arlington Tankers Slips To Loss In Q3

Arlington Tankers Slips To Loss In Q3; Declares Dividend
October 23, 2007
(RTTNews)

Arlington Tankers Ltd. reported third quarter net loss of $41 thousand, compared to a profit of $37 thousand in the earlier year quarter. On a per share basis, company reported breakeven, flat with last year.
On a non-GAAP basis, net income for the quarter was $4.91 million or $0.32 per share, in comparison with $5.23 million or $0.34 per share in the prior year quarter.

On average, 3 analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.32 per share for the quarter.

Quarterly total revenue decreased to $17.51 million from $17.60 million in the year ago quarter. Two Wall Street analysts projected revenues of $17.62 million for the quarter.

In addition, the company Board of Directors has declared a cash dividend of $0.59 per share. The dividend is payable on November 6, 2007 to shareholders of record at the close of business on November 2, 2007.

The Company expects to announce its next dividend on January 29, 2008 and to pay that dividend on or about February 12, 2008.

Euronav NV loses $23 million

Euronav NV (EURN BB): Belgium's only publicly traded oil- tanker owner said it had a third-quarter loss of $23.3 million on lower rates and rising marine-fuel costs. Euronav said it remains ``cautious'' on the outlook for the rest of the year and the start of 2008. The shares declined 10 cents, or 0.5 percent, to 20.71 euros.

Bloomberg Oct. 24th

Analysts Trash Tanker Stocks

Frontline, Teekay Crash Nears Amid Tanker Glut, Crude
By Alaric Nightingale and Todd Zeranski
Oct. 22 (Bloomberg)

The record increase in oil prices and the unprecedented number of new tankers transporting crude is a stock market crash waiting to happen.

That, at least, is the growing consensus among analysts who say the widening gap between West Texas Intermediate crude and the rate for supertankers shipping Middle East oil to Asia means industry titans Frontline Ltd., Overseas Shipholding Group Inc. and Teekay Corp. have unsustainable valuations.

The Bloomberg Tanker Index has risen 44 percent in the past two years, even as freight rates sank 49 percent. The price of marine fuel, the biggest cost for shipowners, has advanced 44 percent in that time, reaching a record $446.50 a metric ton on Oct. 17. The number of ships available is close to a record.

``It doesn't look good at all,'' said Andreas Vergottis, who helps manage $1.2 billion at Isle of Man-based Tufton Oceanic Ltd., the world's biggest hedge fund dedicated to shipping. ``We've got a wall of worry and a wall of new buildings flooding the market ahead of us.'' He said the stocks are 30 percent overvalued.

Frontline, the world's biggest operator of supertankers, reached a record low of 3.80 kroner in December 1998. The stock this year has gained 30 percent and was trading 2.1 percent lower at 233 kroner as of 12:03 p.m. in Oslo. The gain has helped make Chairman John Fredriksen into Norway's richest man, with a fortune that Forbes magazine estimates at $7 billion.

Too Many Ships

The looming decline for tanker stocks is a legacy of the biggest tanker construction program in history. Teekay, Frontline and Overseas Shipholding in 2004 earned a combined $2.2 billion, triple the level of a year earlier, because of a jump in world oil demand. They used that profit to help order 522 tankers from builders including Hyundai Heavy Industries Co. and Samsung Heavy Industries Co.

The size of the oil tanker fleet expanded 3.8 percent this year, overwhelming the 1.7 percent increase in crude oil demand estimated by the International Energy Agency. The fleet will increase by as much as 32 percent during the next five years, estimates Lloyd's Register-Fairplay, the company that assigns ship registration numbers.

Tankers are being built at the fastest rate ever, according to Clarkson Plc, the world's largest shipbroker, which began collecting industry data in 1852.

Tankers capable of hauling 1.2 billion barrels of crude, equal to about two weeks of global oil consumption, will enter service in the six years that end in 2009, according to Clarkson. The total is 1 percent higher than the previous record, from the 1970s.

Straight to Scrapyards

Ship demand at that time slowed, and newly built tankers were sent straight to demolition, said Per Mansson, a shipbroker for Nor Ocean Stockholm AB, a former second mate and executive at Frontline before Fredriksen bought the company. Some tankers hauled one cargo from Asian shipyards to northwest Europe, only to be laid up in the fjords of Norway, he said.

``It got so bad that, on one voyage from Sweden to Venezuela, we turned the engine off and went with the current down to the Caribbean because fuel was so expensive,'' said Mansson, 55. ``We got a telegram from Exxon to go at 7 knots, so we just floated down.''

The Bloomberg Tanker Index has gained 32 percent this year, outpacing a 5.8 percent increase in the Standard & Poor's 500 Index, and a 6.4 percent drop in U.S. government 10-year bonds. Oil is up 41 percent and reached a record $90.07 a barrel in New York Mercantile Exchange trading on Oct. 19.

Teekay has appreciated 32 percent this year to $57.72 on the New York Stock Exchange, valuing the Bahamas-based company at $4.3 billion. Overseas Shipholding, based in New York, has advanced 27 percent to $71.56.

Demolitions

Shares of Frontline are heading for an 11 percent decline, according to Henrik With, the DnB Nor Markets analyst whose advice on Frontline gave clients a 91 percent gain in the past year. Teekay may decline 26 percent, he forecasts. Among all analysts tracked by Bloomberg, at least 70 percent say the two stocks aren't worth buying.

Frontline Chief Executive Officer Bjoern Sjaastad in an interview said oil carriers will be sold and converted to haul bulk commodities, easing the ship surplus. Also, the speed of demolitions ``will go a lot faster than many people think,'' bolstering freight rates, he said.

Teekay spokeswoman Alana Duffy said the company can't comment before an earnings release at the end of the month. Overseas Shipholding spokeswoman Jen Schlueter said CEO Morten Arntzen wasn't immediately available for an interview.

Time Charters

Shipowners can protect against a drop in the single-voyage market by leasing vessels on so-called time charter contracts that can last months or years, while paying a fixed amount.

About 40 percent of Frontline's ships had such protection for 2007 and 2008, according to an Aug. 22 statement. Seventeen percent of Teekay's 111 carriers had such contracts, while none of Overseas Shipholding Group's biggest carriers had such deals.

Teekay protects itself against increases in the cost of marine fuel. Frontline and Overseas Shipholding don't. The industry's pricing mechanism, known as Worldscale, is updated once a year to reflect changing fuel prices.

Demand for single-voyage charters is ``stuck in a rut'' because the soaring price of oil is squeezing refiners and discouraging purchases, said Omar Nokta, an analyst at Dahlman Rose & Co. in New York. He advises investors hold their Frontline shares.

Losing Money

Refineries are losing 63 cents on each barrel they process in Europe, compared with a profit of $7.86 in May, because crude costs are rising faster than prices for gasoline and diesel, according to data compiled by Bloomberg.

``All this weakness is stemming from refineries not being in the market,'' said Nokta, whose call on Frontline during the past year led to a 35 percent profit for investors.

Analysts value shipping stocks in relation to the cost of second-hand tankers. From December 2003 through July 2007, those ship values more than doubled, according to data from the London- based Baltic Exchange. Since then, ship prices have dipped, exchange data show.

``Asset values will fall and dividend payments must be cut,'' said DnB Nor Markets' With. ``Too much fleet capacity coming on stream will put pressure on earnings from 2008 to 2010.''

Freight Rates

Falling freight rates and record fuel costs have given shipowners their longest string of losses in five years, according to Citigroup Inc., the third-largest lender to the shipping industry. So-called very large crude carriers, which transport about 2 million barrels, are losing more than $13,000 a day in the market for day-to-day charters. Shipowners are spending more on fuel and debt payments than they collect in rent.

Suezmax vessels, the biggest tankers that can navigate Egypt's Suez canal while full, are losing more than $10,000 a day. Owners of aframaxes, 600,000-barrel carriers that usually haul crude within the same continent, are losing about $13,000 a day, Citigroup estimates.

Thirty of the largest tankers may be sold and converted into carriers for grain, coal and iron ore, markets where freight rates are at a record high, Frontline's Sjaastad said.

``For the next 15 months, there isn't going to be substantial additions to the fleet, you'll have depletions going to dry bulk,'' said Dahlman Rose's Nokta. ``If you have the demand push, then they'll be able to absorb the vessels. Demand would keep a natural floor.''

China's economy is growing at almost 12 percent a year and India's by 9.3 percent, spurring demand for oil, steel, iron ore and coal.

No Cargoes

Some 50 supertankers have failed to find cargoes in the past month, and vessels will compete for consignments in November, extending declines for owners, forecasts Paris-based shipbroker Barry Rogliano Salles.

Relief may not come until 2010, when the United Nations' shipping agency, the International Maritime Organization, adopts a ban on single-hull tankers, those at greatest risk of spilling oil in the event of an accident. Once the policy takes full force five years later, the only tankers plying the oceans must have two steel hulls.

``Everything now is about what happens between today and 2010,'' says Ole Stenhagen, an analyst at SEB Enskilda in Oslo. ``We are in for a real dip in rates and a rough environment.''

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anj25lHh6K4E

Aframax Rates Rise

Caribbean Tanker Rate Increases on Competition From Europe
By Todd Zeranski
Oct. 18 (Bloomberg)

The rate to transport oil from the Caribbean advanced, spurred by higher prices in European shipping markets.

``Mediterranean activity has increased, so some owners are moving there,'' said Mike Jedlicke, a broker at Dietze & Associates LLC in Wilton, Connecticut. ``That's thinning out'' the number of available vessels, straining Caribbean supply.

Stronger Aframax bookings in the Mediterranean and the Black Sea forces Caribbean-area charterers to pay higher rates to keep vessels in the region.

The average Aframax rate advanced 15 points, or 11 percent, to Worldscale 155. WS 155 is equal to about $20,325 a day, after expenses such as fuel and port fees.

The rate fell to WS 92.5 on Sept. 11, the lowest since 2001, according to Bloomberg data. Rates increased 22 percent yesterday and are up 48 percent this week.

Malaysia's Eagle Anaheim Nereo is scheduled to reach its Houston destination on Oct. 21, according to Bloomberg data.

The Caribbean is the world's third-largest Aframax-tanker market after the Mediterranean and Southeast Asia. An Aframax is the most common tanker used to move oil in the region.

Persian Gulf Tanker Rates May Rise as Fuel Prices Crimp Income
By Alaric Nightingale
Oct. 18 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may rise for an eighth day as soaring refueling prices continue to crimp income from rentals.

Record marine fuel, or bunker, costs mean some owners, who rented extra tankers at fixed prices anticipating rising demand in the northern hemisphere winter, may be losing about $30,000 a day when they lease out those ships in the day-to-day, or spot market, Charlie Fowle, a director at London-based shipbroker Galbraith's Ltd., said by phone today.

``The bunker factor at the moment is dramatic,'' Fowle said. ``Just to get the same return, owners need 10 to 20 percent more'' from the oil companies who book their ships.

Hyundai Merchant Marine, a South Korean shipowner, hired the tanker Hebei Spirit at a rate of 59 Worldscale points, according to a report from Athens-based Optima Shipbrokers today. That's 3.5 percent above the London-based Baltic Exchange's benchmark assessment of 57.03 Worldscale points for cargoes to Asia.

Hebei Spirit should normally cost less to hire than the benchmark because it's fitted with one steel hull separating its cargo from the ocean. The exchange's assessment also includes carriers with two steel hulls that cut the risk of an oil spill in the event of an accident and usually have better engines.

At 57.03 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $20,024 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

A week ago, the same rate of 57.03 points would have earned $3,500 a day more when the cost of bunkers was 9 percent cheaper.

Bloomberg Roundup October 13th

Black Sea, Mediterranean Tanker Rates May Rise on Winter Demand
By Alaric Nightingale
Oct. 12 (Bloomberg)

The cost of shipping 80,000-ton cargoes of crude oil from Black Sea and Mediterranean ports to refineries in southern Europe may rise next week as bookings increase before the northern hemisphere winter.

Demand for so-called aframax tankers has been ``busy'' for the past several days, Francesco Sparviero, a broker at Nolarma Tankers SRL in Genoa, said in an e-mailed note today. The extra demand may continue into next week as refineries buy crude to turn into winter fuels such as heating oil, he added.

Increased bookings have cut the number of tankers competing for cargoes and enabled owners to negotiate higher rental rates, Sparviero said. The London-based Baltic Exchange's benchmark rate for shipments across the Mediterranean gained 28 percent to 120.45 Wordscale points in the four days to Oct. 11.

Reduced daylight hours are starting to delay vessels in two Turkish straits that ships exiting and entering the Black Sea must navigate. The average waiting time now is between two and three days going into the Black Sea and about two days to exit, according to Sparviero.

Delays at the two waterways normally rise in winter, reducing the supply of Russian crude to world markets and cutting tanker supply because the ships are unavailable for hire for longer periods.

A rental rate of 120.45 Worldscale points equates to $18,613 a day, according to a formula from Oslo-based shipbroker RS Platou AS and Bloomberg ship-fuel prices. Teekay Shipping Corp., the world's biggest dedicated oil-tanker company and operator of aframaxes, needs about $15,000 a day to break even.

Black Sea, Africa Oil-Tanker Rates May Slump on Surplus Ships
By Alaric Nightingale
Oct. 5 (Bloomberg)

The cost of shipping 1 million-barrel consignments of crude oil from ports in the Black Sea and west Africa may extend two weeks of declines as a surplus of tankers compete for cargoes.

There is a ``long'' list of tankers available to meet ``very little'' demand, Luis Bernar, a tanker broker for Medco Shipbrokers in Madrid, said in an e-mailed note today.

``Everyone is hoping that the last quarter of the year will improve but I'm starting to think this is wishful thinking,'' Bernar said. Rental rates will only improve if there are weather- related delays and cargo demand accelerates, he said.

Rentals from the two ports, the biggest for 1 million-barrel tankers globally, began falling on Sept. 21, with rates from the Black Sea dropping 17 percent and those from west African ports losing 12 percent, according to benchmark data from the London- based Baltic Exchange.

Black Sea hire rates declined to 81.96 points and west African bookings slipped to 82.62 points, according to the most- recent prices from the exchange.

Based on a rental rate of 81.96 Worldscale points, operators of double-hull suezmax vessels earn about $15,508 a day on the 12-day round trip between the Black Sea port of Novorossiisk and Augusta, Italy, according to a formula by R.S. Platou, an Oslo- based shipbroker, and Bloomberg bunker prices.

At 82.62 points, a west African cargo would pay $16,579 a day, according to the same formula.

Frontline Ltd., the world's biggest supertanker operator, said Aug. 22 it needs $22,000 to break even on each of its suezmaxes.

Route Rates 2 - Test

route	class	size	Days	WS	TCE - equiv	breakeven	Date
TD1	VLCC	280 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD2	VLCC	260 kmt	xxxx	xxxx	$xx,000		xxx
TD3	VLCC	250 kmt	38 days	51.64	$17,662	$30,000	Oct. 11th
TD4	VLCC	260 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD5	Suezmax	130 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD6	Suezmax	135 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD7	Aframax	80 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD8	Aframax	80 kmt	??	116.00	xxx	xxx	Oct. 11th
TD9	Aframax	70 kmt	??	102.50	$6,500	$15,700	Oct. 11th
TD10	Panamax	50 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD11	Aframax	80 kmt	??	120.45	$18,613	$15,000	Oct. 11th
TD12	Panamax	55 kmt	xxxx	xxxx	$xx,000	xx,000	xxx
TD14	Aframax	80 kmt	xxxx	110.00	xxx	xxx	Oct. 11th

Backwardation and Contango

Some time ago, a reader asked -

"The crude market seems to be trading back in (at least a mild) backwardation, which means lower inventories. How do you see this impacting on World Scale points/BDTI?"

My view is that the global supply chain for oil is in many cases up to 6 months long, so I typically try to average monthly and weekly figures into periods that are at least 3 months long. Short term fluctuations are just noise. Tanker rates are a matter of supply and demand. There is increasingly less oil being exported and more tankers in all segments entering the market. Even in the face of positive economic growth and supposedly higher demand for oil - the oil simply isn't there to move and their is an increasing glut of tankers. I would expect rates to drop, but there is hardly any room for them to drop, they are already so low.



The only mystery to me is why the valuations for the tanker companies/stocks continue to rise. The investors and the market must see something I'm missing, but I've yet to find what that is.

Here is a good discussion of the backwardation / contango issue :
Speculation and fundamentals in oil prices

Bloomberg Roundup October 11th

Asian Aframax Rate Falls on Limited Cargoes, Ship Supply Gain
By Katherine Espina
Oct. 11 (Bloomberg)

Asian rates for oil tankers that can carry 80,000 metric tons fell for a third day on limited cargoes from the Middle East, causing an oversupply of vessels.

The aframax rate for transporting oil from Kuwait to Singapore, the world's fourth-busiest route for such vessels, dropped 0.08 percent to Worldscale 115.83 yesterday, according to data from the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $11.96, according to Bloomberg data.

``There could be some more room for rates to go down given there are plenty of vessels and little activity,'' Takeshi Ando, a shipbroker at Matsui & Co., said by phone from Tokyo.

Aframax rates have declined 7 percent in the past four weeks, as holidays in China slowed chartering and higher fuel oil prices in Fujairah, the Middle East's largest bunker port, discouraged shipments to the Far East.

Only two aframax tankers capable of moving 215,415 tons of fuel are scheduled to arrive in Singapore next week compared with this week's four, which are able to transport 412,305 tons, Bloomberg data showed. About five to 10 aframaxes are waiting for employment in Singapore this week, shipbrokers said.

Rising supply of new vessels may also contribute to declining rates. More than 240 aframax tankers are on order for the next five years, adding to the 728 units at the end of 2006, France-based shipbroker Barry Rogliano Salles said in its review of the tanker market.

Southeast Asia is the world's second-busiest aframax market, after the Mediterranean. The Caribbean is the third busiest.

Other freight rates. Source: Baltic Exchange:

Route               Tons    Rate   Change   Carrier
Kuwait-Singapore    80,000  115.83  -0.08%  Aframax
Indonesia-Japan     80,000  110.00  -4.35%  Aframax
Persian Gulf-Japan  75,000  113.75  +0.92%  Oil Product Tanker
Singapore-Japan     30,000  202.00  -0.04%  Oil Product Tanker
Middle East-Japan   55,000  161.73  +4.5%   Oil Product Tanker

Persian-Gulf Tanker Costs May Resume Decline on Glut of Ships
By Alaric Nightingale
Oct. 11 (Bloomberg)

The cost of shipping Middle East crude to Asia, which advanced for the first time in 10 days yesterday, may resume its decline as a glut of ships will counter increased demand for cargo from Saudi Arabia.

The London-based Baltic Exchange's key ship-rental rate rose as refinery officials said Dahran-based Saudi Aramco will supply Asian customers with full crude-oil volumes for the first time in a year from November. The company previously cut volumes by 9-10 percent. The Organization of Petroleum Exporting Countries has pledged to boost output from next month by 500,000 barrels a day.

``I don't see the market picking up,'' said Mathieu Philippe, a tanker broker in Dubai at Paris-based Barry Rogliano Salles. ``There are plenty of ships around. I don't think these announcements will have any effect for the next few days.''

Fifty-seven tankers that so far haven't been hired are able to reach ports by Oct. 31, according to a Barry Rogliano report, meaning oil-company officials will have a surplus of vessels to use when November bookings get under way.

The Baltic Exchange's rental rate, used in negotiations between shipowners and oil companies and to settle freight hedging contracts, advanced 2.3 percent to 51.64 Worldscale points yesterday, its first gain since Sept. 27.

At 51.64 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $17,662 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel oil prices.

Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $30,000 a day to break even on each of its supertankers.

Caribbean Tanker Rate Rises as U.S. Crude Oil Inventory Falls
By Todd Zeranski
Oct. 11 (Bloomberg)

The rate to transport oil from the Caribbean rose as U.S. oil inventories declined and refineries increased production.

The Caribbean is the world's third-largest Aframax-tanker market after the Mediterranean and Southeast Asia. An Aframax is the most common tanker used to move oil in the region.

The average Aframax rate rose 2.5 points, or 2.5 percent, to Worldscale 102.5. WS 102.5 is equal to about $6,500 a day, after expenses such as fuel and port fees, according to Poten & Partners.

Houston-based broker Lone Star, R.S. Platou reported a rate of WS 105. Poten & Partners reported WS 100.

The rate fell to WS 92.5 on Sept. 11, the lowest since 2001, according to Bloomberg data.

General Maritime Corp., the second-largest U.S. tanker owner behind Overseas Shipholding Group Inc., said last year it had a break-even rate for its fleet of about $15,700 per day. The New York-based company operates many of its vessels in the Caribbean.

BDTI - Baltic Dirty Tanker Index Routes

---	From	To	Size	Class
TD1	MEG	USG	280,000mt	VLCC
TD2	MEG	Singapore	260,000mt	VLCC
TD3	MEG	Japan	250,000mt	VLCC
TD4	WAF	USG	260,000mt	VLCC
TD5	WAF	USAC	130,000mt	Suezmax
TD6	Black Sea	Mediterranean	135,000mt	Suezmax
TD7	North Sea	Eur Continent	80,000mt	Aframax
TD8	Kuwait	Singapore	80,000mt	Aframax
TD9	Caribbean	USG	70,000mt	Aframax
TD10	Caribbean	USAC	50,000mt	Panamax
TD11	Mediterranean	Mediterranean	80,000mt	Aframax
TD12	Antwerp	Houston	55,000mt	Panamax
TD14	Indonesia	Japan	80,000mt	Aframax

Persian Gulf Tanker Rates May Extend Slump

Persian Gulf Tanker Rates May Extend Slump Amid Glut of Vessels
By Alaric Nightingale
Oct. 8 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may fall for a seventh day as a surplus of ships compete for cargoes.

Refineries still need to arrange shipping for about 11 more cargoes this month while 74 very large crude carriers, or VLCCs, can reach the region's ports by Oct. 31, according to a report today from Paris-based shipbroker Barry Rogliano Salles.

``I'm somewhat worried,'' Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said in an e-mailed note today. ``We are already knocking on the November door and rates are very low. We might be in for a bad couple of years.''

Exxon Mobil Corp., the world's biggest oil company, hired the tanker Shinyo Navigator at a rate of 52.5 Worldscale points, according to a report today from Athens-based Optima Shipbrokers. That's 3 percent below the London-based Baltic Exchange's Oct. 5 assessment of 54.16 points for voyages to Asia.

Shinyo Navigator is fitted with two steel hulls separating its cargo tanks from the ocean. Such vessels usually cost more to hire than the benchmark because they cut the risk of an oil spill in the event of an accident. The exchange's price also takes single-hull tankers into account.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Negotiating Rates

Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 54.16 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $20,197 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

Black Sea, Africa Oil-Tanker Rates May Slump on Surplus Ships
By Alaric Nightingale
Oct. 5 (Bloomberg)

The cost of shipping 1 million-barrel consignments of crude oil from ports in the Black Sea and west Africa may extend two weeks of declines as a surplus of tankers compete for cargoes.

There is a ``long'' list of tankers available to meet ``very little'' demand, Luis Bernar, a tanker broker for Medco Shipbrokers in Madrid, said in an e-mailed note today.

``Everyone is hoping that the last quarter of the year will improve but I'm starting to think this is wishful thinking,'' Bernar said. Rental rates will only improve if there are weather- related delays and cargo demand accelerates, he said.

Rentals from the two ports, the biggest for 1 million-barrel tankers globally, began falling on Sept. 21, with rates from the Black Sea dropping 17 percent and those from west African ports losing 12 percent, according to benchmark data from the London- based Baltic Exchange.

Black Sea hire rates declined to 81.96 points and west African bookings slipped to 82.62 points, according to the most- recent prices from the exchange.

Based on a rental rate of 81.96 Worldscale points, operators of double-hull suezmax vessels earn about $15,508 a day on the 12-day round trip between the Black Sea port of Novorossiisk and Augusta, Italy, according to a formula by R.S. Platou, an Oslo- based shipbroker, and Bloomberg bunker prices.

At 82.62 points, a west African cargo would pay $16,579 a day, according to the same formula.

Frontline Ltd., the world's biggest supertanker operator, said Aug. 22 it needs $22,000 to break even on each of its suezmaxes.

Dividend plays for volatile times

Dividend plays for volatile times
By Jim Jubak
9/28/2007

[...] As always, the question is how far to reach for yield. I can certainly find stocks with strong current cash flows and high yields but where the strength of future cash flows seem very closely connected to the fortunes of the U.S. economy. For example, Nordic American Tanker Shipping (NAT) pays a dividend of 12.04%, but the company has just warned investors that the third quarter looks soft. According to the company, jitters in the financial markets have led to softness in spot rates for tankers.

I don't know if that's the reason, in which case the problem will pass quickly, or whether the weakness reflects some deeper trend in the global economy. But given that 11 out of the company's 12 tankers operate in the spot market, instead of being under long-term contracts, the company's business is very leveraged to the rate of growth in the global economy. Since I know that I don't know the rate of global economic growth in the next year with any certainty, reaching for that much
yield is too risky right now [...]

Imarex/SHX Closing Prices 09.28.07 (Fri)

Imarex
TD3: not available - VLCC - Ras Tanura (Saudi Arabia) to Chiba (Japan), 260,000mt
TC2: not available - MR2 - Rotterdam to New York (USAC)

SHX: 378.47 ( -2.67/-0.70% ) - PHLX Marine Shipping Index (at highs)





Baltic Dirty Tanker Index: 920 ( -1.29%)

OTII Rates	Sept. 28	Fri	4pm	prev wk
From	To	Size	WS	change
AG	Singapore	260 K	70.00	+ 7.50
AG	Japan	250 K	67.50	+ 6.00
AG	USG	280 K	47.50	0
WAF	USG	260 K	60.00	0
WAF	USAC	130 K	87.50	- 5.00
Indonesia	Japan	80 K	115.00	0

Imarex/SHX Closing Prices 09.28.07
Imarex, PHLX, SHX, WS, Worldscale, Baltic Dirty Tanker Index, BDTI, chart, graph

IEA Monthly Oil Market Report September

Crude tanker rates, already at multi-year lows on certain routes in early August, remained very weakthroughout the month. Low oil-in-transit volumes and the resultant vessel surplus continue to keep VLCC rates unseasonably low. An expanding tanker fleet has been a bearish influence this year and while scrapping activity has apparently remained modest, conversions to more profitable dry bulk carriers have risen.

VLCC rates from the Middle East Gulf to Japan languished just above the $7/tonne mark for the first half of August. This reflected weak tanker fundamentals, even by summer standards. A temporary $2/tonne mid-month jump to over $9/tonne resulted from greater chartering activity on the route, coinciding with reports of an upturn in September OPEC sailings, especially on eastbound routes. Rising OECD refinery throughputs from October, after autumn maintenance, also offered potential support for near-term demand for crude transportation. Still, Japan-bound rates faded to finish August at $8.50/tonne. VLCC rates from the Middle East Gulf to the US Gulf were equally weak in August, remaining flat at around $14/tonne. This compares with rates of $25/tonne at the end of August 2006; a busy period of chartering before OPEC cuts were implemented.

Crude tanker rates from West Africa fell to their lowest point for two years, in $/tonne terms, by early September. Suezmax rates to the US Atlantic finished near $7/tonne, down by $2/tonne on the month. Transatlantic VLCC rates fell by even more. Despite greater demand for eastbound voyages, regional vessel demand has otherwise been undermined by recent refinery outages and approaching maintenance. Caspian production maintenance will reduce September BTC (Baku-Tbilisi-Ceyhan) export volumes, potentially adding downside to Mediterranean Suezmax rates in the coming weeks.

Clean tanker rates broadly fell in August, with the exception of LR1 routes (75,000 tonnes) from the Middle East Gulf to Japan. Rates on this trade rose by $2/tonne on the month to end at over $21/tonne in early September. Support came from firm naphtha demand from North Asian petrochemical plants, plus reports of reduced regional vessel availability following some gasoil arbitrage trade from Asia to Europe. In Western markets, transatlantic 35,000-tonne clean rates to the US drifted from a mid-month peak of $16/tonne to around $13/tonne, despite improving arbitrage economics at the end of August.

Likely Tanker Demand Increase

If OPEC increases production 500,000 barrels per day in the run-up to Nov. 1st, Saudi Arabia and Kuwait's allotment combined is 400,000 bpd. The remaining 100,000 bpd is Venezuela's. All the other OPEC-10 countries have no commitment but to stay flat.

400,000 barrels is one VLCC leaving every 5 days. With the 38-day round trip from the Gulf to Asia, this creates the need for a maximum of 8 VLCCs in addition to what are being currently employed.

But there is a catch. The UAE has a planned 600,000 bpd decrease in production due to maintenance scheduled for November. It is unclear how long this outage will last, but the expectation would be for only one month.

Imarex Freight Futures for the TD3 route spiked to WS79 from WS56 on Deutsche Bank's recommendation. Seasonal factors may also be playing a part in tanker rates bouncing off their lows. But the need for only 8 more supertankers is unlikely to push these rates much higher than where they were in 2006.

Bloomberg Roundup September 23rd

Buy Futures for Persian-Gulf Oil Tankers, Deutsche Bank Says
By Grant Smith
Sept. 21 (Bloomberg)

Investors should buy futures contracts for tankers shipping crude from the Middle East because Saudi Arabia will probably raise output, Deutsche Bank AG said.

Freight rates for supertankers hauling crude cargoes from the Persian Gulf to Japan, a route known as TD3, are close to a four-year low as fleet expansion outpaces growth in demand for oil. Saudi Arabia is set to contribute the largest share of a 500,000 barrel-a-day output increase to be implemented by the Organization of Petroleum Exporting Countries from Nov. 1.

``Any increase in Saudi production we expected would be reflected in a rally in TD3 rates,'' Deutsche Bank analysts including Michael Lewis in London and Adam Sieminski in New York said in a report today. ``We find that Middle East oil production has tended to be loosely correlated with TD3 freight levels.''

A rise in shipping costs would be the first indicator that Saudi Arabia intends to deliver on the OPEC pledge and reverse the 1 million-barrel-a-day production cut implemented from the start of the year, the analysts said.

Freight rates for the TD3 route fell to a four-year low of 48.94 Worldscale points on Sept. 13, according to the London- based Baltic Exchange.

Persian Gulf Oil Tanker Rates Increase the Most in Four Weeks
By Grant Smith
Sept. 21 (Bloomberg)

The cost of transporting Middle East crude oil to Asia, the busiest market for supertankers, posted its biggest gain in four weeks as bookings accelerated for ships loading in October.

There have been 34 October bookings reported this week by Paris-based shipbroking firm Barry Rogliano Salles, compared with 21 the week before. Hire rates have advanced amid simultaneous bookings for vessels on the same dates next month, said Barry Rogliano broker Mathieu Philippe.

``Sentiment has changed,'' Philippe said by telephone from Dubai. ``I would anticipate October's going to be more active than September, and rates are going slightly higher.''

Rates for very large crude carriers, or VLCCs, hauling crude from the Persian Gulf to Japan rose 12 percent to 58.3 Worldscale points yesterday, the biggest daily increase since Aug. 22, according to London's Baltic Exchange. Rates fell to a four-year low of WS 48.9 on Sept. 13 as the growth in the global fleet of tankers outpaced the increase in demand for oil.

``Owners realized it was better keeping ships idle, and an artificial shortage was created,'' Philippe said. Some owners may be making a loss on the tankers they hire because of record prices for ship fuel and declining freight rates.

At WS 58.3, owners of double-hulled VLCCs can earn about $24,166 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.

Asian Aframax Tanker Rates Fall on Bookings Dearth, Ship Glut
By Katherine Espina
Sept. 21 (Bloomberg)

Asian rates for tankers that can carry 80,000 metric tons of oil may extend a decline next week from a three-week low as the pace of bookings slowed, increasing the number of vessels competing for cargo.

The aframax tanker rate for transporting oil from Kuwait to Singapore, the world's fourth-busiest route for such vessels, fell 0.31 percent to Worldscale 120.58 yesterday, its third day of decline, according to data from the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $12.46, according to Bloomberg data.

Aframax rates dropped 3 percent last week as bookings stalled in the third quarter, a typically slow period. One aframax tanker carrying 106,680 tons of cargo is scheduled to arrive in Singapore next week from six tankers, capable of carrying 621,445 tons, this week, Bloomberg data showed.

Ship-owners had difficulty maintaining rates last week as there were ``too many ships relative to chartering activity,'' Dnb NOR Markets analysts Henrik With and Glenn Lodden said in their report. ``Vessel availability is still massive, which will act to cap the potential for any significant increase.''

Almost 60 million deadweight tons of double-hull aframax tankers were in service at the end of 2006, and the fleet is expected to rise to over 80 million tons at the end of 2009, according to France-based shipbroker Barry Rogliano Salles.

Southeast Asia is the world's second-busiest aframax market, after the Mediterranean. The Caribbean is the third busiest.

OPEC Cargoes May Rise 0.6% in Month to Oct. 6, Consultant Says
By Grant Smith
Sept. 20 (Bloomberg)

OPEC's daily shipments of crude will probably rise 0.6 percent in the four weeks to Oct. 6 from the previous month after the group agreed to increase output, the consultant Oil Movements said.

The Organization of Petroleum Exporting Countries will load an estimated 24.19 million barrels a day onto tankers, compared with 24.05 million in the month ended Sept. 8, the Halifax, England- based consultant wrote in a report today.

The 10 OPEC members bound by quotas decided at a Sept. 11 meeting in Vienna to raise production by 500,000 barrels a day to relieve the effect of record prices on global economic growth.

Shipments from the Middle East will increase 0.3 percent to an average 17.25 million barrels a day, from 17.2 million barrels in the four weeks to Sept. 8, Oil Movements said. The total amount of oil on tankers will climb 0.3 percent to 458.54 million barrels, it predicted.

Persian Gulf Tanker Rates Extend Advance as Owners Stand Firm
By Grant Smith
Sept. 20 (Bloomberg)

The cost of transporting Middle East crude oil to Asia, the busiest market for supertankers, rose for a fourth day as shipowners refused to offer discounts.

Owners of very large crude carriers, or VLCCs, may already be losing money on the vessels they hire out as record oil prices sap demand and the global fleet expands. Rates have rebounded 6.3 percent from a four-year low on Sept. 13.

``Owners have been able to take the initiative even when volumes are not so high,'' Finn Engelsen, managing director of shipbroker Lorentzen & Stemoco, said by phone from Oslo. ``But you need a stronger inducement for a rally, and we are not going to get a rally with these economic conditions.''

Rates for VLCCs hauling crude from the Persian Gulf to Japan rose to 52.03 Worldscale points yesterday, according to London's Baltic Exchange. Hire costs have also gained because of Typhoon Waipha off China and tropical storms near the Gulf of Mexico. Strong winds can delay tankers and reduce vessel supplies.

At 52.03 Worldscale points, owners of double-hulled VLCCs can earn about $17,421 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.