Persian Gulf Oil-Tanker Rates May Fall

Persian Gulf Oil-Tanker Rates May Fall for Second Week on Glut
By Alaric Nightingale
Sept. 3 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may fall for a second week as a glut of vessels forces owners to compete for cargoes.

There are about 100 very large crude carriers, or VLCCs, that can load at Middle East ports this month compared with 40 to 50 outstanding cargoes, according to a report today from Paris- based shipbroker Barry Rogliano Salles.

GS Caltex Corp., South Korea's second-biggest refiner, hired the vessel New Vitality at a rate of 57 Worldscale points, according to Barry Rogliano. That's 6.4 percent below the London- based Baltic Exchange's assessment for similar voyages of 60.91 points. The index dropped 7.6 percent last week.

New Vitality is fitted with one steel hull separating the crude it transports from the ocean. Such ships normally cost less to hire than the exchange's benchmark, which also takes into account modern double-hull tankers that cut the risk of an oil spill in the event of an accident.

Hurricane Felix, a category 5 storm that is forecast to hit Central America this week, so far hasn't buoyed demand for vessels, Nikos Varvaropoulos, a broker for Athens-based Optima Shipbrokers, said in an e-mailed note today.

Storms slow shipping operations, reducing vessel supply. It will take ``two to three weeks'' before any storm-related delays boost the tanker markets, Varvaropoulos said.

The number of tankers signaling that they are sailing toward U.S. ports fell by a third in the two weeks to Aug. 29, as refineries in the world's biggest oil-consuming nation undertake annual repair works.

At 60.91 Worldscale points, owners of double-hulled VLCCs can earn about $28,957 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 said Aug. 22 it needs $30,000 a day to break even on each of its supertankers.