Persian Gulf Tanker Rates May Rise

Persian Gulf Tanker Rates May Rise as OPEC Production Climbs
By Alaric Nightingale
June 19 (Bloomberg)

The cost of shipping Middle East crude to Asia, which fell yesterday for the first time in five days, may rise as OPEC members increase oil production, bolstering tanker demand.

The expectation of higher output may allow operators to negotiate higher charter rates, said Nikos Varvaropoulos, a tanker broker for Optima Shipbrokers in Athens. The International Energy Agency, an adviser to 26 oil-consuming nations, said June 12 that the Organization of Petroleum Exporting Countries' production will climb by 700,000 barrels a day in the third and fourth quarters.

``That's why owners are bullish,'' Varvaropoulos said in an e-mailed note today. ``The market will pick up.''

Chevron Corp., the second-largest U.S. oil company, hired the vessel Oriental Jade at a rate of 80 Worldscale points, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's 15 percent above the London-based Baltic Exchange's benchmark assessment of 69.67 points for shipments to Asia.

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

At 71.02 Worldscale points, owners of modern very large crude carriers, or VLCCs, can earn about $42,786 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.

Frontline Ltd., the world's biggest oil-tanker company by capacity, said May 30 that it needs $29,500 a day to break even on each of its VLCCs.

The scale of the Middle East exports for next month may become clearer this week as oil-producing countries reveal when oil companies must have vessels in place to call at Persian Gulf ports for July, shipbrokers including Nor Ocean Stockholm AB and Capital Shipbrokers said yesterday.