Thursday, July 5, 2007

No collapse forecast as tanker rates fall near year lows

The world's leading crude oil freight routes from the Gulf were close to their lows for this year on Monday but analysts said the freight market was not on the brink of collapse.Industry sources also said there was no sign that crude demand was faltering, blaming the weakness on the dynamics of the tanker market instead. Ship brokers said VLCC freight rates from the Gulf to Japan, the world's benchmark crude route, were trading at an average of WS60, close to a year low of WS52 hit in January. Rates for double-hulled units were trading five Worldscale points higher and single-hulled tonnage up to 10 points lower. Below that level, a three-and-a-half year low was in sight at WS50.5, struck in October 2003, according to Reuters data. Analysts said rates were pressured by long-standing Opec cuts, refinery maintenance in Asia, high stocks in the United States and bulging ship supply. They said there was no evidence that crude oil demand was being eroded, pointing instead to strong demand for long-haul oil into China, which was buoying rates. "We wouldn't speak of it as a freight collapse...but it does seem to have moved into a softer summer trading market that we've had in previous years," said Claire Grierson, an analyst with Simpson, Spence & Young in London.

E.A. Gibson shipbrokers said VLCC voyage rates to Japan were trading at WS105 or $67,200 a day in June 2006 compared with WS59 or $34,750 on Monday.

In a report it also cited the VLCC and ULCC fleet rising to 494 by mid-2007 from 477 in mid-2006.

Rates for VLCCs from the Gulf to the US were similarly pressured, trading at an average of WS50, five points short of a low for the year.

Beyond that, costs on the major route were close to a four-year low of WS42.50 hit in August 2003.

Brokers said that the rates averaged $30,000 to $40,000 a day to Asia, down from closer to $50,000 in the last couple of weeks.

Source: Reuters
July 5th, 2007

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