Persian Gulf Rates Surge Most in Three Years

Persian Gulf Oil-Tanker Rates Surge Most in Almost Three Years
By Alaric Nightingale
Nov. 23 (Bloomberg)

The cost of shipping Middle East crude oil to Asia, the world's busiest market for supertankers, climbed by the most in almost three years as demand eliminated a glut of ships that were competing for cargoes.

Hire rates for the key benchmark voyage to Japan climbed 29.5 percent today, the biggest one-day increase since Jan. 30, 2005, according to data from the London-based Baltic Exchange.

Supply of tankers to load in the first half of December is getting ``tighter and tighter,'' Atsuto Otani, a London-based broker at Galbraith's Ltd., said by phone today. ``Sometimes when cargoes rush into the market, charterers just panic and pay up.''

PTT Pcl, Thailand's biggest energy company, hired the vessel Asian Progress II at a rate of 134 Worldscale points, Oslo-based shipbroker PF Bassoe A/S said in a report today. The Baltic Exchange's benchmark rate for a comparable voyage to Singapore rose to 130 points.

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

Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

At 130 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $85,498 a day on a 25- day round trip from Saudi Arabia to Singapore, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg marine fuel prices.

`Plenty' of Vessels

Gains may be tempered once refineries start booking ships to load after Dec. 20 when ``plenty'' of vessels will become available, Otani said. Out of the 64 tankers so far hired to load in December, none have been arranged to load after the 20th of the month, Paris-based shipbroker Barry Rogliano said in an e- mailed report today.

There are 52 carriers available for hire up to Dec. 23, according to Barry Rogliano. That compares with 52 likely outstanding cargoes for the remainder of the month.

Demand for crude oil will rise 2.8 percent in the first quarter of 2008, the biggest year-on-year gain since the first three months of 2005, according to data from the Paris-based International Energy Agency.

Frontline Ltd., the world's biggest VLCC operator, said Nov. 15 it needs $30,000 a day to break even on each of its supertankers.

Bookings for VLCCs 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.

Asian Aframax Rates May Rise a Sixth Week on December Cargoes
By Katherine Espina
Nov. 23 (Bloomberg)

Asian aframax rates may extend gains for a sixth week on increased demand for December cargoes before the Northern Hemisphere winter.

The rate to transport 80,000 metric tons of fuel from Kuwait to Singapore, the world's fourth-busiest route for such ships, rose 0.9 percent to Worldscale 148.86 yesterday, the highest since July 3, according to the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $13.96, based on Bloomberg data.

Aframax rates on the Middle East-Singapore route have gained 27 percent in the past five weeks, boosted by higher bunker prices and shipments of November cargoes. The surge in rates of supertankers, also known as very large crude carriers or VLCCs, may boost charter fees of smaller ships like aframaxes.

The hiring rate of supertankers for the benchmark voyage to Japan climbed 20 percent yesterday, the biggest one-day increase since March 11, 2005, according to data from the Baltic Exchange. A supertanker can transport 2 million barrels of oil.

``The jump in the VLCC market will initially boost sentiment,'' Channa Munasinghe, director at Singapore-based shipbroker Alliance Tanker Chartering Pte, said in a phone interview today. Cargoes for supertankers may eventually be split for transport into smaller vessels.

That ``could potentially create a jump, not immediately but in about two to three weeks,'' Munasinghe said. Rates for aframaxes may rise 5 to 10 points next week, he said.

Exxon Mobil

``The stronger VLCC market should in turn lead to an improved sentiment for smaller tanker tonnage,'' Henrik With and Glenn Lodden, analysts at Oslo-based DnB NOR Markets, said in a weekly report.

Four aframaxes, which are able to transport a combined 439,703 deadweight tons of cargo, are scheduled to arrive in Singapore this week, and one, capable of moving 98,570 tons, next week, according to Bloomberg data.

Exxon Mobil Corp. hired the tanker Aegean Harmony to transport 90,000 tons of fuel oil on Nov. 22 at the rate of Worldscale 170, Seatown Shipbroking Pte in Singapore said in a report today.

At that rate, moving 80,000 tons of fuel oil will cost Worldscale 151.10, a 1.5 percent premium to prices quoted on the Baltic Exchange for the Middle-East to Singapore route.

The double-hulled Aegean Harmony was built in 2007 by South Korea's Samsung Heavy Industries Co., according to Bloomberg data. Exxon is the world's largest oil company.

Southeast Asia is the world's busiest aframax market after the Mediterranean. The Caribbean is the third busiest.

Bloomberg Roundup October 13th

Black Sea, Mediterranean Tanker Rates May Rise on Winter Demand
By Alaric Nightingale
Oct. 12 (Bloomberg)

The cost of shipping 80,000-ton cargoes of crude oil from Black Sea and Mediterranean ports to refineries in southern Europe may rise next week as bookings increase before the northern hemisphere winter.

Demand for so-called aframax tankers has been ``busy'' for the past several days, Francesco Sparviero, a broker at Nolarma Tankers SRL in Genoa, said in an e-mailed note today. The extra demand may continue into next week as refineries buy crude to turn into winter fuels such as heating oil, he added.

Increased bookings have cut the number of tankers competing for cargoes and enabled owners to negotiate higher rental rates, Sparviero said. The London-based Baltic Exchange's benchmark rate for shipments across the Mediterranean gained 28 percent to 120.45 Wordscale points in the four days to Oct. 11.

Reduced daylight hours are starting to delay vessels in two Turkish straits that ships exiting and entering the Black Sea must navigate. The average waiting time now is between two and three days going into the Black Sea and about two days to exit, according to Sparviero.

Delays at the two waterways normally rise in winter, reducing the supply of Russian crude to world markets and cutting tanker supply because the ships are unavailable for hire for longer periods.

A rental rate of 120.45 Worldscale points equates to $18,613 a day, according to a formula from Oslo-based shipbroker RS Platou AS and Bloomberg ship-fuel prices. Teekay Shipping Corp., the world's biggest dedicated oil-tanker company and operator of aframaxes, needs about $15,000 a day to break even.

Black Sea, Africa Oil-Tanker Rates May Slump on Surplus Ships
By Alaric Nightingale
Oct. 5 (Bloomberg)

The cost of shipping 1 million-barrel consignments of crude oil from ports in the Black Sea and west Africa may extend two weeks of declines as a surplus of tankers compete for cargoes.

There is a ``long'' list of tankers available to meet ``very little'' demand, Luis Bernar, a tanker broker for Medco Shipbrokers in Madrid, said in an e-mailed note today.

``Everyone is hoping that the last quarter of the year will improve but I'm starting to think this is wishful thinking,'' Bernar said. Rental rates will only improve if there are weather- related delays and cargo demand accelerates, he said.

Rentals from the two ports, the biggest for 1 million-barrel tankers globally, began falling on Sept. 21, with rates from the Black Sea dropping 17 percent and those from west African ports losing 12 percent, according to benchmark data from the London- based Baltic Exchange.

Black Sea hire rates declined to 81.96 points and west African bookings slipped to 82.62 points, according to the most- recent prices from the exchange.

Based on a rental rate of 81.96 Worldscale points, operators of double-hull suezmax vessels earn about $15,508 a day on the 12-day round trip between the Black Sea port of Novorossiisk and Augusta, Italy, according to a formula by R.S. Platou, an Oslo- based shipbroker, and Bloomberg bunker prices.

At 82.62 points, a west African cargo would pay $16,579 a day, according to the same formula.

Frontline Ltd., the world's biggest supertanker operator, said Aug. 22 it needs $22,000 to break even on each of its suezmaxes.

Bloomberg Roundup October 11th

Asian Aframax Rate Falls on Limited Cargoes, Ship Supply Gain
By Katherine Espina
Oct. 11 (Bloomberg)

Asian rates for oil tankers that can carry 80,000 metric tons fell for a third day on limited cargoes from the Middle East, causing an oversupply of vessels.

The aframax rate for transporting oil from Kuwait to Singapore, the world's fourth-busiest route for such vessels, dropped 0.08 percent to Worldscale 115.83 yesterday, according to data from the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $11.96, according to Bloomberg data.

``There could be some more room for rates to go down given there are plenty of vessels and little activity,'' Takeshi Ando, a shipbroker at Matsui & Co., said by phone from Tokyo.

Aframax rates have declined 7 percent in the past four weeks, as holidays in China slowed chartering and higher fuel oil prices in Fujairah, the Middle East's largest bunker port, discouraged shipments to the Far East.

Only two aframax tankers capable of moving 215,415 tons of fuel are scheduled to arrive in Singapore next week compared with this week's four, which are able to transport 412,305 tons, Bloomberg data showed. About five to 10 aframaxes are waiting for employment in Singapore this week, shipbrokers said.

Rising supply of new vessels may also contribute to declining rates. More than 240 aframax tankers are on order for the next five years, adding to the 728 units at the end of 2006, France-based shipbroker Barry Rogliano Salles said in its review of the tanker market.

Southeast Asia is the world's second-busiest aframax market, after the Mediterranean. The Caribbean is the third busiest.

Other freight rates. Source: Baltic Exchange:

Route               Tons    Rate   Change   Carrier
Kuwait-Singapore    80,000  115.83  -0.08%  Aframax
Indonesia-Japan     80,000  110.00  -4.35%  Aframax
Persian Gulf-Japan  75,000  113.75  +0.92%  Oil Product Tanker
Singapore-Japan     30,000  202.00  -0.04%  Oil Product Tanker
Middle East-Japan   55,000  161.73  +4.5%   Oil Product Tanker

Persian-Gulf Tanker Costs May Resume Decline on Glut of Ships
By Alaric Nightingale
Oct. 11 (Bloomberg)

The cost of shipping Middle East crude to Asia, which advanced for the first time in 10 days yesterday, may resume its decline as a glut of ships will counter increased demand for cargo from Saudi Arabia.

The London-based Baltic Exchange's key ship-rental rate rose as refinery officials said Dahran-based Saudi Aramco will supply Asian customers with full crude-oil volumes for the first time in a year from November. The company previously cut volumes by 9-10 percent. The Organization of Petroleum Exporting Countries has pledged to boost output from next month by 500,000 barrels a day.

``I don't see the market picking up,'' said Mathieu Philippe, a tanker broker in Dubai at Paris-based Barry Rogliano Salles. ``There are plenty of ships around. I don't think these announcements will have any effect for the next few days.''

Fifty-seven tankers that so far haven't been hired are able to reach ports by Oct. 31, according to a Barry Rogliano report, meaning oil-company officials will have a surplus of vessels to use when November bookings get under way.

The Baltic Exchange's rental rate, used in negotiations between shipowners and oil companies and to settle freight hedging contracts, advanced 2.3 percent to 51.64 Worldscale points yesterday, its first gain since Sept. 27.

At 51.64 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $17,662 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 marine fuel oil prices.

Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $30,000 a day to break even on each of its supertankers.

Caribbean Tanker Rate Rises as U.S. Crude Oil Inventory Falls
By Todd Zeranski
Oct. 11 (Bloomberg)

The rate to transport oil from the Caribbean rose as U.S. oil inventories declined and refineries increased production.

The Caribbean is the world's third-largest Aframax-tanker market after the Mediterranean and Southeast Asia. An Aframax is the most common tanker used to move oil in the region.

The average Aframax rate rose 2.5 points, or 2.5 percent, to Worldscale 102.5. WS 102.5 is equal to about $6,500 a day, after expenses such as fuel and port fees, according to Poten & Partners.

Houston-based broker Lone Star, R.S. Platou reported a rate of WS 105. Poten & Partners reported WS 100.

The rate fell to WS 92.5 on Sept. 11, the lowest since 2001, according to Bloomberg data.

General Maritime Corp., the second-largest U.S. tanker owner behind Overseas Shipholding Group Inc., said last year it had a break-even rate for its fleet of about $15,700 per day. The New York-based company operates many of its vessels in the Caribbean.

OSG Adds 4 Suezmax Tankers

OSG Adds New Tanker Class to Its Crude Oil Fleet with Four Suezmax Vessels
(BUSINESS WIRE)

Overseas Shipholding Group, Inc. (NYSE:OSG), a market leader in providing energy transportation services, announced today it has expanded its crude oil tanker fleet with the addition of four Suezmax vessels. The vessels complement OSG’s crude oil tanker fleet of ULCCs, VLCCs, Aframaxes and Panamaxes. Ranging in size between 120,000 and 200,000 deadweight tons (dwt), Suezmaxes offer greater port flexibility than VLCCs and better economies of scale than Aframax tankers. The addition of the vessel class to OSG’s fleet enhances its ability to offer customers a full range of vessel options when transporting crude oil throughout the world.

Mats Berglund, head of OSG’s Crude Oil Tanker Strategic Business Unit, commented, “OSG is now the only ship owner in the world that can offer customers service in all crude oil tanker segments as well as lightering. In addition, the vessels enhance our ability to gather market intelligence enabling us to better understand and respond to changes in the market and to better serve the needs of our customers.”

OSG has purchased, sold and bareboat chartered-back two Suezmax tankers from Double Hull Tankers, Inc. (NYSE: DHT). OSG expects to take delivery of a 2001-built 164,000 dwt vessel in December 2007 and the second ship, a 2000-built 153,000 dwt vessel, is expected to deliver to OSG in the first quarter of 2008. The vessels have been chartered for seven and 10 years, respectively.

OSG has time chartered-in two 156,000 dwt sister ships for three years. The vessels, currently under construction in China, are expected to deliver in the fourth quarter of 2008.

Morgan Stanley May Run Larger Tankers

February 22, 2006

Morgan Stanley May Run Larger Tankers for Oil Trades
By Alaric Nightingale

Morgan Stanley, the world's second- largest securities firm, plans to expand its oil tanker business as global demand for crude rises, according to two people briefed on the discussions.

The company is considering operating suezmaxes, 1 million- barrel vessels that would be the largest Morgan Stanley controls, said the people, who declined to be identified because the plan is still being debated. The ships often haul crude from West Africa and the Black Sea to the U.S. and Europe.

Morgan Stanley, which has traded crude oil since 1984, wants to bolster its shipping unit to compete with companies such as Glencore International AG and Vitol Group. The New York-based company purchased a tanker operator last year for $200 million. Taking control of larger ships would help ensure the bank has sufficient quantities of crude to support its trades.

``Morgan Stanley is everywhere, but the physical presence is the one big thing missing in their book,'' Anthony Nunan, deputy general manager for international petroleum business at Mitsubishi Corp. in Tokyo, said by telephone. ``The physical business is getting bigger but more competitive.''

Carlos Melville, a Morgan Stanley spokesman in London, declined to comment on the plans.

By having tankers, a trader can try to influence the underlying oil price by buying or selling crude, boosting profit, according to Nunan. The price at which most derivative contracts are settled is determined by the price of the underlying oil.

Flexible Storage

Morgan Stanley is the world's biggest trader of oil derivatives, according to rankings compiled by Risk magazine.

It had more money at risk trading commodities than equities last year, according to an annual filing. So called value-at-risk, or the estimated amount its positions could lose in a day, was $30 million for commodities on average in the year to Nov. 30 and $28 million for equities, the filing showed.

No other banks operate oil tankers, said Nikos Varvaropoulos, a tanker broker for Optima Shipbrokers in Athens.

``It gives them the flexibility to target markets where there's a short-term demand that might have a higher price,'' said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. ``It gives them floating storage so they can deliver to anyone, anywhere in the world.''

The Paris-based International Energy Agency estimates demand for oil will rise 1.8 percent to 86 million barrels a day in 2007.

Heidmar Ships

The ships would be run by the Heidmar Group, a Connecticut- based shipping company Morgan Stanley bought in September. As the operator of the vessels, Morgan Stanley doesn't own the assets so it doesn't carry the risk of their value depreciating.

The Heidmar acquisition gave Morgan Stanley access to a fleet of 87 smaller tankers, with the biggest capacities approaching 843,000 barrels. The purchase price was disclosed in a regulatory filing Oct. 6.

Morgan Stanley does not disclose how much it uses the Heidmar fleet, Mark Lake, a spokesman for the bank in New York, said.

The bank rarely ships physical crude oil, according to Jean- Francois Vincke, a freight trader for Riverlake Shipping SA in Geneva. When the bank wants to ship refined oils the vessel booking is discussed privately with Heidmar, making it impossible to judge how much Morgan Stanley uses its current fleet, said Truls Dahl, a tanker broker for Fearnleys AS in Oslo.

Suez Canal

Suezmaxes carry the name because they're the biggest tankers that can navigate Egypt's Suez Canal when fully loaded. They cost about $80 million, according to Fearnleys, a shipping broker.

``They don't want to be caught with a cargo in the market place and have freight rates destabilizing their trading activities,'' said Sverre Bjorn Svenning, a director at Fearnleys.

A larger class of tanker, called Very Large Crude Carriers, or VLCCs, can transport more than 2 million barrels of oil.

A bigger fleet of ships gives an owner more bargaining power over hiring prices. Heidmar doesn't have to disclose how much the carriers cost to hire, or who is buying the cargo. Heidmar also ships oil products such as gasoline, naphtha and jet fuel.

Morgan Stanley said today its investment management division agreed to buy 80 percent of Montreal Gateway Terminals from European tour operator TUI AG.

Frontline Downgraded by UBS

Frontline Shares Downgraded by UBS on Outlook for Rental Rates
By Alaric Nightingale
July 13 (Bloomberg)

Shares of Frontline Ltd., the world's largest oil-tanker company by capacity, were downgraded by UBS AG, which said ship-rental rates are poised to fall, cutting the shipping line's ability to pay dividends.

UBS analysts led by Dominic Eldridge in London cut their rating on the stock to ``reduce 2'' from ``neutral 2'' in a note to clients today.

The ``12-month trend'' for tanker-rental rates is ``poor'' because of the supply and demand outlook, the analysts wrote.

Frontline's dividend payout, calculated by UBS at about 11 percent for this year, is ``totally dependent on earnings, which are themselves almost totally dependent upon the level of spot tanker rates,'' they said.

IEA Medium Term Oil Market Report - Tanker Market

IEA Medium Term Oil Market Report (MTOMR) July 2007
Implications for the Tanker Market

A crude trade forecast slightly ahead of crude demand growth (in percentage terms) should theoretically suggest an increase in tanker employment, if the trend also applies to seaborne trade. Reconciling approximate seaborne crude trade volumes with a distance matrix reveals that tanker tonne-mile demand (trade volume multiplied by distance that cargoes are shipped, an indicator of tanker demand) should rise even more steeply, by 3.5%. The principal contributors to increased tonne-mile demand are higher long-haul exports to China and the US from Saudi Arabia and West Africa, outpacing the countering effect from lower long-haul exports from Middle East to OECD Europe and OECD Pacific.

While increasing volumes of long-haul crude will essentially be shipped in two million-barrel (or larger) VLCCs, demand for million-barrel suezmax tankers should be supported by higher exports from FSU and North Africa via the Mediterranean and increased volumes leaving West Africa. Growth in Russian exports to Europe could boost employment of aframaxes, which carry around half a million barrels.

The tanker trade should be well placed to meet these challenges: there are more tankers on order than at any point since the shipbuilding boom of the early 1970s. A current orderbook of around 140 million tonnes carrying capacity compares with just 73 million at the end of 2003. Today’s orderbook implies that tankers to be delivered by the end of 2010 equate to almost 38% of existing fleet supply in cargo-carrying terms.

Orders for mid-range and smaller tankers are notably strong, alongside historically high orders for new VLCCs, Suezmaxes and Aframaxes. Massive demand, rising steel costs (plus safety requirements to use more steel in tanker design) and increased competition for shipyard space from other shipping sectors (amid a surge in orders for non-tanker ship types) have pushed tanker newbuild costs to record highs. This is despite ongoing growth in world shipbuilding capacity. A brand new VLCC constructed in Korea now costs around $133 million compared with an average $68 million in 2003. Shipyards in Korea, Japan and China are full until at least 2010.


click on image for larger view

A brimming orderbook provides the potential to redress the prevailing vessel undersupply, prompted by weak tanker ordering early this decade, which has supported freight rates over the last three years. However, this depends on how many vessels are scrapped.

High vessel earnings have kept scrappings at record lows over the last three years. No VLCC has been scrapped since 2004. While sustained lower freight rates would prompt an upswing in scrapping, a different, clearer threat to vessel supply is the 2010 (IMO) deadline for the phasing-out of all singlehulled tankers. In the VLCC sector, this would translate into a reduction in the current operational fleet by as much as 28%, as vessels are scrapped or converted into dedicated floating storage units, offshore oil production vessels or even dry-bulk carriers. However, certain exceptions may dilute this figure (such as for vessels with double-bottoms or double sides) and some vessels may continue to operate outside IMO signatory waters. Simpson, Spence and Young forecast vessel deletions to correspond to around 3% of the current tanker fleet annually through 2010, with the most pronounced declines in VLCC tonnage. When combined with orderbook data, SSY fleet projections suggest net annual expansions of the tanker fleet of around 6% by end-2010.

Despite potential support from firm trade growth and vessel phase-outs, freight rates in the medium term face genuine downside risk from an expanding fleet. However, perhaps a greater threat to freight rates is the downside risk from oil market fundamentals. Demand dented by an economic downturn or by higher prices following underperforming supply could significantly undermine oil trade and tanker demand.

Here is the report itself (80 pages)http://online.wsj.com/public/resources/documents/iea20070707.pdf

Crude Oil and Product Tanker Voyage Freight Rates

Charts from June 2007 IEA Oil Market Report

Persian Gulf Tanker Rates May Fall for Sixth Day

Persian Gulf Tanker Rates May Fall for Sixth Day on Ship Glut
By Alaric Nightingale
June 25 (Bloomberg)

The cost of hiring supertankers to transport Middle East crude oil on the busiest shipping route to Asia, which fell every day last week, may extend its decline as demand for July cargoes fails to cut an oversupply of vessels.

Refineries still need to hire about 60 percent of the vessels they need to ship cargoes from Persian Gulf ports next month. A glut of carriers ``appears to be keeping a cap on things at the moment,'' said Simon Chattrabhuti, an analyst at London-based shipbroker Galbraith's Ltd., in an e-mailed note.

Demand has so far failed to emerge for this week, Chattrabhuti said, adding that rental rates are ``maybe a bit softer so far.'' Ship brokers normally spend the first working day of the week producing so-called position lists that show the locations of oil tankers and when they will next be available for hire. The state of supply and demand usually becomes clearer the following day.

SK Corp., South Korea's biggest refiner, hired the carrier Front Highness at a rate of 62.5 Worldscale points, according to a report from Paris-based Barry Rogliano Salles. That's 7 percent below the London-based Baltic Exchange's June 22 benchmark assessment of 67.22 points.

Forty-five tankers have been hired already to load in July, compared with an average of 106 bookings a month last year, according to Barry Rogliano. There are 103 tankers available for hire up to July 25, the broker said in a report today.

At 67.22 Worldscale points, owners of modern very large crude carriers, or VLCCs, can earn about $38,830 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.

Oil Tanker Companies

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Persian Gulf Tanker Rates May Rise

Persian Gulf Tanker Rates May Rise as OPEC Production Climbs
By Alaric Nightingale
June 19 (Bloomberg)

The cost of shipping Middle East crude to Asia, which fell yesterday for the first time in five days, may rise as OPEC members increase oil production, bolstering tanker demand.

The expectation of higher output may allow operators to negotiate higher charter rates, said Nikos Varvaropoulos, a tanker broker for Optima Shipbrokers in Athens. The International Energy Agency, an adviser to 26 oil-consuming nations, said June 12 that the Organization of Petroleum Exporting Countries' production will climb by 700,000 barrels a day in the third and fourth quarters.

``That's why owners are bullish,'' Varvaropoulos said in an e-mailed note today. ``The market will pick up.''

Chevron Corp., the second-largest U.S. oil company, hired the vessel Oriental Jade at a rate of 80 Worldscale points, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's 15 percent above the London-based Baltic Exchange's benchmark assessment of 69.67 points for shipments to Asia.

Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars per ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

At 71.02 Worldscale points, owners of modern very large crude carriers, or VLCCs, can earn about $42,786 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 oil-tanker company by capacity, said May 30 that it needs $29,500 a day to break even on each of its VLCCs.

The scale of the Middle East exports for next month may become clearer this week as oil-producing countries reveal when oil companies must have vessels in place to call at Persian Gulf ports for July, shipbrokers including Nor Ocean Stockholm AB and Capital Shipbrokers said yesterday.