Persian Gulf Tanker Rates Rise Most in 20 Months

Persian Gulf Tanker Rates Rise Most in 20 Months; Demand Jumps
By Alaric Nightingale
Aug. 23 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, climbed the most in 20 months and may extend its rally as cargo demand strengthens.

September demand is outpacing that of August ``by a long way,'' Tim Coffin, an analyst at London-based Capital Shipbrokers LP, said in an e-mailed note today. Tanker-hire prices are ``firming fast,'' he said, ``we didn't expect it.''

Some cargo loadings may have been delayed from August to September, he said, reducing tanker demand.

Sinochem Corp., China's biggest petrochemicals trader, hired the tanker Iran Nesa at a rate of 72.5 Worldscale points, according to a report from Oslo-based PF Bassoe AS today. That's 16 percent above the London-based Baltic Exchange's benchmark rate of 62.7 points for cargoes to Asia.

The exchange's rate climbed 20 percent yesterday, the biggest one-day gain since Jan. 22 last year.

At 62.7 Worldscale points, owners of double-hulled VLCCs can earn about $33,030 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. Yesterday, they were making $19,881 a day, based on the same calculations.

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

Too Many Ships

Still, there are too many ships for hire, according to a report from Paris-based shipbroker Barry Rogliano Salles today. There are likely to be about 70 more cargoes loaded in September, based on average monthly demand. By contrast, 100 vessels can reach the Middle East by Sept. 23, the broker said.

Bookings for 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. Shipments to the U.S. and Caribbean, the second-biggest market, account for 14 percent of demand for supertankers.