Persian Gulf Rates May Extend Drop

Persian Gulf Tanker Rates May Extend Drop, Fueling Owner Losses
By Grant Smith
July 17 (Bloomberg)

The cost of transporting Middle East crude oil to Asia, down 15 percent in the past month, may extend declines, forcing shipowners to keep leasing out supertankers at a loss.

There are enough ships available in the Persian Gulf in the first two weeks of August to handle about three-quarters of potential cargoes, Paris-based shipbrokers Barry Rogliano Salles said in an e-mailed report yesterday. There are 96 ships free until Aug. 16, compared with 124 cargoes scheduled for collection this month.

``There are too many ships at the moment, and still some left over from July,'' Per Mansson, a broker at Sweden's Nor Ocean Stockholm AB, said by mobile telephone. ``It's fairly gloomy.''

Rates on the route between the Persian Gulf and Asia, the world's busiest, were at 59.4 Worldscale points yesterday, according to London's Baltic Exchange.

At that rate, owners of modern, very large crude carriers, or VLCCs, can earn about $28,434 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. That compares with the $29,500 that Frontline Ltd., the biggest operator by capacity, says it needs in order to break even.

Hire rates have declined 15 percent since June 16 as reduced imports by Asian refiners during the maintenance phase in May created a backlog of vessels.

Bookings of supertankers 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.