Sunday, August 12, 2007

Persian Gulf Tanker Rates Little Changed

Persian Gulf Tanker Rates Little Changed as Owners Fight Losses
By Alaric Nightingale
Aug. 10 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may be little changed as owners continue to resist leasing out their carriers at unprofitable levels.

``The shipping market is cyclical and owners are awaiting an upturn,'' Nikos Varvaropoulos, a tanker broker for Optima Shipbrokers in Athens, said today in an e-mailed note.

Falling freight rates, fueled by OPEC's crude-oil export cuts last year and growth in the world fleet of tankers, have pushed rates down to levels where owners are starting to refuse to transport the cargoes. Owners of more-modern ships may also be declining cargoes because they have to include finance costs when calculating their break-even figures, Varvaropoulos said.

GS Galtex Corp., South Korea's second-biggest oil refiner, hired the La Prudencia at a rate of 54 Worldscale points, according to a report today from Oslo-based shipbrokers PF Bassoe A/S. That's 6.8 percent above the London-based Baltic Exchange's benchmark assessment of 50.54 points for similar voyages.

La Prudencia is fitted with two hulls to cut the risk of an oil spill in an accident. The exchange assessment also takes into account single-hull tanker-rental rates, which are normally lower.

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

At 50.54 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, with a carrying capacity of 270,000 tons can earn about $21,105 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 VLCC operator, said May 30 it needs $29,500 to break even on each of its supertankers. Frontline has to pay financing costs for its carriers.

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. U.S. and Caribbean cargoes account for 14 percent and are the world's second-busiest market for supertankers.

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