Frontline Says Fuel Costs May Spur Tankers to Slow

Frontline Says Fuel Costs May Spur Tankers to Slow
By Alaric Nightingale
July 14 (Bloomberg)

Frontline Ltd., the world's largest owner of supertankers, said a jump in fuel costs may spur owners to sail vessels more slowly to conserve energy, shrinking fleet supply and bolstering ship-rental rates.

The shipper and ``several major owners'' sailed 20 percent slower than normal toward the end of last year after ``low'' demand and record fuel costs hurt margins, according to a May 2 regulatory filing from the company. That cut fleet capacity by about 10 percent and was followed by the biggest two-month gain in freight rates in November and December for at least 16 years.

The possibility of slowing is ``soon again emerging,'' Jens Martin Jensen, Oslo-based interim chief executive officer of Frontline's management unit, said in an e-mail July 10. ``I believe all owners, including ourselves, are monitoring this on a daily basis.''

Supertankers, ships bigger than the Chrysler Building and designed to haul 2 million-barrel cargoes of crude, burn about 100 metric tons of marine fuel a day when sailing at full speed, according to Riverlake Shipping SA, Switzerland's biggest shipbroker. Marine fuel, or bunkers, advanced to a record $754.50 a ton in Singapore July 11, according to prices on Bloomberg.

Frontline fell 0.5 krone, or 0.2 percent, to 326.5 kroner ($64.25) as of 2:16 p.m. in Oslo trading, valuing the shipping line at 24.4 billion kroner. The shares earlier fell as much as 2 percent. The stock has gained 26 percent this year.

Supertanker owners trimmed about $20,000 from their daily fuel costs by slowing down last year, the May 2 filing said. Fuel now represents about 85 percent of daily costs, Jensen said.

Shipping Competitors

Frontline and its competitors sailed at about 12 knots last year, compared with 15 knots normally, according to the filing.

Supertankers are sailing close to their fastest speed for at least two months, according to data complied by Bloomberg.

The average VLCC is moving at 10.45 knots, 13 percent faster than on May 29 when they were traveling at 9.22 knots. The data include ships at anchor. Tanker rental rates are on course for a record year, earning about $107,000 a day, a Bloomberg survey of 13 analysts and brokers this month showed.

Sailing slower would help mitigate a fleet expansion that the International Energy Agency said July 1 will ``massively'' exceed growth in oil demand in the next two years.

Owners decided to slow down last ``autumn,'' Frontline Chief Financial Officer Inger Klemp said by phone July 10. The jump in ship-rental rates after that probably encouraged some to speed up again, she said.

Still, other owners may decide that current rental earnings are too good to sail slower, said Per Mansson, managing director of tanker broker Nor Ocean Stockholm AB.

``It won't happen,'' he said in an e-mailed note today. ``Owners cannot start giving away money in a market like this to improve things at a later stage.''

Oman to Spend $4 Billion on Shipping Fleet

Oman to spend $4bn on shipping fleet
by Luke Pachymuthu
Monday, 24 March 2008
ArabianBusiness.com

Oman's state shipping firm will spend up to $4 billion in the next three to four years to expand its fleet size, a senior company official said, part of the sultanate's efforts to upgrade its oil industry.

Oman Shipping Company (OSC) is looking to grow its fleet mainly to meet demand for energy transportation, Chief Financial Officer (CFO) Kuldeep Mathur told newswire Reuters in a recent phone interview.

"We are expanding the fleet with a view of the future demands for our export grade crudes and products," he said.


Part of OSC's multi-billion dollar expansion includes a recent order to build 10 Very Large Crude Carriers (VLCCs), Mathur said.

In February, OSC placed two separate orders with South Korea's Hyundai Heavy Industries Company, the world's largest shipbuilder, to build five supertankers, and with Daewoo Shipbuilding and Marine Engineering Company to build another five VLCC's. The deals were valued at about $770 million each.

OSC is in discussions with the National Iranian Tanker Company (NITC) on securing a long-term charter contract for at least five of the recently ordered supertankers, Mathur said.

"Yes, we are discussing the option with them, along with others, but we are not decided yet," Mathur said declining to offer details.

International pressure and the implementation of broad-based sanctions on Iran, led by the US, have made it difficult for the Islamic republic to access funding from financial institutions.

"Sleeving through Oman would make sense, because it allows for Iran to get around the issue of financing," said a Singapore-based sales and purchase shipping broker, referring to the practice when one firm with limited credit uses another with better credit to do a trade on its behalf for a fee.

NITC was not immediately available for comment.

The expansion planned by OSC, whose stakeholders are the Ministry of Finance and Oman Oil Company, is part of the sultanate's broader vision to upgrade its shipping and chartering sector and depend less on leased vessels.

Oman, like other Gulf states, is also trying to diversify its economy away from oil, which generates almost half its gross domestic product but is seeing declining production.

OSC boasts a current fleet size of seven liquefied natural gas (LNG) tankers and two clean tankers, with four oil tankers including a VLCC and Very Large Gas Carrier on the order book.

The CFO said part of the expansion plan included growing the company's clean tanker fleet, by adding between 15 and 20 refined product tankers.

"We are looking at new and considering buying second-hand clean product tankers as well... we have certain refineries in Oman and taking position on this to provide employment prospects for these vessels," Mathur said, without giving details.

Oman, which operates two refineries - Oman Refinery Company and Sohar Refinery Company with a combined capacity of more than 225,000 barrels per day (bpd) - is planning a third facility of about 300,000 bpd at the southeastern city of Al-Duqm.

The proposed refinery, part of the Duqm Refining and Petrochemical Complex and is due for completion in 2012, will have a significant refined product export slate, sources familiar with the project said.

"We should see more potential for export of light distillate products like naphtha and gasoline to support growing regional demand," Mathur said.

Financing for the company's fleet expansion could likely come via loan arrangements from the North Asian institutions, Japan Bank for International Cooperation, Korea Export Insurance Corporation (KEIC), or European banks BNP Paribas and Societe Generale, Mathur said.

"We have a very good relationship with several banks, and could look to either one to finance our expansion plans," he added.

He said the expansion would include some general cargo and multi-purpose vessels. The firm now operates two Supramax bulk vessels. (Reuters)

Persian Gulf Tanker Rates May Drop

Persian Gulf Tanker Rates May Drop as Refineries Delay Cargoes
By Alaric Nightingale
Dec. 20 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may drop as oil companies resist paying record prices to hire ships.

Very large crude carriers, or VLCCs, are making about $300,000 a day on benchmark international trade routes to Asia, according to prices compiled by Bloomberg. In 2004, the previous record year, they made $290,000 a day, according to London-based shipbroker Galbraith's Ltd.

Charterers who hire ships for oil companies may now be ``holding back if possible for fear of paying too much,'' Charlie Fowle, a director at the company, said in an e-mailed note today.

Sinochem Corp., China's biggest chemicals trader, hired the tanker C. Champion at a rate of 285 Worldscale points, according to a report today from Oslo-based shipbroker PF Bassoe AS. That's 10 percent below the London-based Baltic Exchange's benchmark rate of 317.66 points for voyages to Asia.

Higher Rates

Flat rates for ships loading next year are higher than those in 2007 because of record refueling costs. The Baltic Exchange's assessments reflect 2007 flat rates until the end of the year.

At 317.66 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $297,0777 a day on a 39-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 prices.

That means costs for Japanese refineries fell 0.4 percent to $7.42 a barrel from $7.45 a barrel on Dec. 18.

There are 23 modern two-hulled tankers available for hire within the next 30 days, according to a report today from Paris- based Barry Rogliano Salles. There were 40 such ships competing for cargoes two months ago, according to the shipbroker.

Persian Gulf Oil-Tanker Rates May Rise

Persian Gulf Oil-Tanker Rates May Rise on Weather, OPEC Cargoes
By Alaric Nightingale
Aug. 17 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may rise today as the Organization of Petroleum Exporting Countries pumps more oil and two storms threaten to disrupt shipping.

OPEC, supplier of 40 percent of the world's crude, has increased shipments by 1 million barrels a day since July ``without saying anything,'' Jennifer Gordon, a New York-based trading analyst at Deutsche Bank Securities said in an e-mailed note yesterday. A supertyphoon approaching Taiwan and a hurricane off the Lesser Antilles in the Caribbean may delay vessels.

``Weather is always a factor for market movement,'' Nikos Varvaropoulos, a tanker broker for Athens-based Optima Shipbrokers, said in an e-mailed note today.

The benchmark rental rate for shipments to Asia, used to settle freight contracts between owners and oil companies, climbed 1.2 percent to 50.44 Worldscale points yesterday, its biggest one-day gain in six weeks. The rate was previously at its lowest since October 2003.

At 50.44 Worldscale points, owners of double-hulled VLCCs can earn about $19,191 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 a day to break even on each of its supertankers.

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.

China, Kazakhstan to Build Pipelines

China, Kazakhstan to Build Pipelines From Caspian Sea
By Henry Meyer
Aug. 18 (Bloomberg)

The leaders of China and Kazakhstan agreed to finance and build a network of pipelines to supply the world's fastest-growing major economy with oil and gas from the Caspian Sea region.

``The Caspian will be linked to western China,'' Kazakh President Nursultan Nazarbayev told reporters in the capital Astana today after meeting with his Chinese counterpart Hu Jintao. ``These are major projects and today we reached agreement on these issues.''

Kazakhstan's Atasu-Alashankou oil route will be extended and a gas link from Turkmenistan to China through Kazakhstan will be built, Nazarbayev said. The gas link will bypass Afghanistan, Tajikistan and Kyrgyzstan, landlocked countries between Turkmenistan's Caspian shore and China.

China, the world's second-largest energy user, is scouring the globe in search of energy supplies for its economy, which is expanding at an annual rate of 11.9 percent, the fastest pace in more than a dozen years. Kazakhstan and Turkmenistan are the biggest energy suppliers in the former Soviet Union after Russia. The Caspian region they share with Azerbaijan, Iran and Russia holds about 4 percent of the world's proven oil and gas reserves.

The gas pipeline will be able to move 30 billion cubic meters of fuel a year and cost as much as $4 billion to build, Energy Minister Baktykozha Izmukhambetov said in November.

Chinese Investment

The 750-kilometer (1,200-mile) extension of the Atasu- Alashankou oil pipeline will connect China with two oil fields, Kenkiyak and Kumkol, owned and operated by Kazakh units of state- run China National Petroleum Corp. The pipeline will have a capacity of 400,000 barrels a day, or about 5 percent of China's consumption.

China National Petroleum Corp., the biggest Chinese oil producer, said yesterday it will expand oil and gas co-operation with Kazakhstan after spending more than $6.5 billion so far on oil exploration, refining and pipelines in the country.

Nazarbayev, 67, met the Chinese leader as Kazakhstan held parliamentary elections that are expected to cement his 18-year rule. Hu praised Nazarbayev for his ``democratization'' of the former Soviet republic.

IEA July 2007 Report On Tanker Rates

Freight Rates

VLCC rates from the Middle East Gulf drifted below seasonal averages in June, falling most notably on westbound trades. Global volumes of oil at sea are now unseasonably low. The upside potential for rates in the summer, prompted by a decline in Asian refinery maintenance, is diluted by ongoing limits on OPEC exports. Interest in crudes from the Atlantic Basin and Mediterranean pushed rates from these regions slightly higher in June. Ample tonnage eroded clean tanker rates in the Atlantic Basin in June, despite high US gasoline imports.

Tanker trackers report that volumes of oil in transit remain well below seasonal norms, apparently confirming low vessel employment for this time of year. Growing VLCC availability was boosted further in the second half of June by the discharge from several of these two-million barrel vessels which had been storing crude temporarily in the US Gulf. VLCC rates from the Middle East Gulf to US Gulf fell from $20/tonne[$2.73/barrel] at the start of June to around $15/tonne[$2.05/b] in early July.

OPEC cargo reductions continue to undermine any potential for a seasonal rebound in vessel demand as Asian refineries return from maintenance. In line with recent months, Saudi Arabia announced that it will supply 9-10% less crude to refineries in the Far East than contracted volumes in August. VLCC rates from the Middle East Gulf to Japan, now booking for loading in August, are currently around $9/tonne[$1.23/b], down by over $3/tonne from early June. However, eastbound rates have shown signs of rebounding in early July.

Suezmax rates from West Africa to the US Atlantic rose by over $1/tonne, to reach $11.50/tonne[$1.57/b] in the second half of June. Corresponding VLCC rates rose by a similar amount in early July. While these increases coincided with a temporary halt in hostilities from a major rebel group in Nigeria and delays at Nigerian ports, higher Mediterranean chartering was probably more supportive. Black Sea to Med million-barrel rates jumped by $4/tonne in the middle week of June, peaking at almost $12/tonne[$1.64]. There were also reports of improved economics for spot exports of African or FSU grades to the US. Increased interest in Aframax vessels in the Caribbean lent support to late-June rates for the sector and reduced broader vessel availability. Brisk chartering elsewhere contributed to firmness in Aframax rates in the North Sea in June, despite maintenance at production facilities.

Clean product tanker rates fell in June, especially in Western markets. Clean rates for 30,000-tonne trades from Northern Europe to the US Atlantic Coast dropped below $20/tonne[$2.73] at the end of June having started the month near $26/tonne[$3.55]. US gasoline imports remain but increased supply of product tankers in the Atlantic and Mediterranean have had an offsetting effect on spot charter rates. By contrast, limited tanker availability may have bolstered Singapore to Japan clean rates in late June following a quiet month of chartering activity, when refineries increasingly returned to operations.

IEA Oil Market Report July 2007

Asian Aframax Rate Gain May Be Limited

Asian Aframax Rate Gain May Be Limited by Rising Ship Supply
By Katherine Espina
July 26 (Bloomberg)

The rate for shipping oil on tankers that can carry 80,000 metric tons on Asian routes posted the smallest increase in six days and any gain may be limited by the increased availability of ships for hire.

The rate for the Kuwait-to-Singapore route climbed 0.14 percent to Worldscale 132.50 yesterday, according to data from the London-based Baltic Exchange. That puts the cost of shipping a barrel of oil at $1.78, Bloomberg data showed.

``The rates may soften with a lot of vessels out there,'' said Takeshi Ando, a shipbroker at Matsui & Co.'s tanker team said by phone today from Tokyo. ``I don't see a lot of activity from the Koreans.''

Sixteen ships, with a total capacity of 1.61 million tons, will sail to Singapore this month, four of them this week, according to AISLive data on Bloomberg.

Aframax vessels, which can typically carry 600,000 barrels of crude oil, are predominantly deployed on short-haul routes or intra-regional trade.

The cost of moving 80,000 tons of oil to Japan from Indonesia was at Worldscale 140 yesterday, unchanged since July 19, according to data from London-based shipbroker Galbraith's Ltd. That puts the cost of shipping a barrel of oil on the route at $1.64.

The rates of shipping gasoline, diesel and other oil products rose yesterday. The rate of shipping 30,000 tons of oil products to Japan from Singapore gained 0.3 percent to Worldscale 242.50, according to the Baltic Exchange. The cost of moving 55,000 tons of products to Japan from the Middle East climbed 0.6 percent to Worldscale 194.50.

Shipping 75,000 tons of oil product costs 0.7 percent more at Worldscale 142.29 yesterday, based on Baltic Exchange data.

Worldscale points are a percentage of a nominal, or flat, rate for a route. 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.

Asian Aframax Rates May Extend Decline

Asian Aframax Rates May Extend Decline Before August Bookings
By Katherine Espina
July 16 (Bloomberg)

The rate for shipping fuel on tankers that can carry between 80,000 metric tons and 120,000 tons on Asian routes may extend a decline until refiners and traders increase vessel bookings for August.

The cost of shipping 80,000 tons of crude oil on so-called aframax tankers to Singapore from Kuwait dropped 0.6 percent to Worldscale 135.58 on July 13, according to the London-based Baltic Exchange. It fell for a third week, losing 5.2 percent in the week ended July 13.

``July liftings are nearly finished but we have not seen any August loading cargoes yet,'' said London-based shipbroker Galbraith's Ltd. in its weekly report. ``Until August liftings start actively, the trend looks to remain the same at present.''

Aframax tanker rate has fallen 9 percent on the Kuwait- Singapore route so far this month on shrinking cargo volume. Six ships, with a total capacity of 605,880 tons, are expected to sail to Singapore this week, according to AISLive data on Bloomberg. That compares with five arrivals in the week ended July 15.

The cost of shipping a barrel of oil on an aframax vessel on the Kuwait-to-Singapore route was unchanged for a second day at $1.94 on July 13, according to Bloomberg data.

Aframax vessels, which can typically carry 600,000 barrels of crude oil, are predominantly deployed on short-haul routes or intra-regional trade. The aframax tanker is among the preferred vessels by non-Organization of Petroleum Exporting Countries in recent years as the harbors and canals that these nations use to export their oil are too small to accommodate supertankers.

Indonesia-to-Japan

The aframax tanker rate on the Indonesia-to-Japan route was steady for a fourth day at Worldscale 145 on July 13, according to Bloomberg data. Shipping a barrel of oil on the route costs $1.70, unchanged from July 10.

The cost of shipping gasoline and other so-called clean petroleum products to Asia on medium-to-large range tankers rose on July 13, according to the Baltic Exchange.

The rate of shipping 55,000 tons of oil products to Japan from the Middle East surged 1.9 percent to Worldscale 193.65 on July 13. It rose 8.7 percent in the week ended July 13, the second week of gains, based on data from the Baltic Exchange.

Supertanker Rates May Fall This Quarter

Supertanker Rates May Fall This Quarter on OPEC Supply Squeeze
By Alaric Nightingale
July 9 (Bloomberg)

The cost of hiring supertankers on the world's busiest shipping lanes may slump this quarter as OPEC, supplier of 40 percent of the world's crude, works to reduce a glut of crude in the U.S.

Daily earnings for carriers able to haul 2 million-barrel cargoes of Middle East crude on the main supertanker route to Asia will drop 42 percent to $47,500 a day, according to the median estimate of seven analysts polled by Bloomberg News July 5 and 6. They were about $82,000 in the same quarter last year.

Crude stockpiles in the U.S., the world's biggest oil- consumer, have soared to a nine-year high. The glut may prompt the Organization of Petroleum Exporting Countries to curb shipments, swelling the number of supertankers available to transport loads and hurting earnings at owners such as Frontline Ltd., according to Finn Engelsen of Laurentzen & Stemoco A/S.

``As far as OPEC are concerned, there's only one choice and that's to work for a reduction of stocks in the U.S.,'' said Engelsen, managing director at the Oslo-based shipping consultant, who correctly predicted tanker-rental rates would halve at the end of last year when other analysts forecast smaller declines and even gains.

U.S. refineries account for about a quarter of demand for the world's largest crude carriers, according to data from New York-based McQuilling Brokerage Services LLP. When shipments to the U.S. decline, it frees up tankers for other routes, reducing hire rates globally.

Below-normal refinery processing, caused by fires and extended maintenance programs, left U.S. oil companies with about 300,000 barrels a day of crude they didn't need in the second quarter, according to Ole-Rikard Hammer, senior analyst at Oslo-based PF Bassoe AS, who has tracked tanker markets for 20 years.

`Extraordinary Situation'

``The problem is the extraordinary U.S. refinery situation,'' said Hammer. ``Inventories are high and they don't need to bring in more crude for the moment.''

OPEC began trimming production in October last year, pushing average tanker-rental rates down to 39 percent less than their year-earlier levels. U.S. crude-oil inventories climbed to 354 million barrels in the second quarter, the most since 1998, according to the Energy Department in Washington.

A growing global fleet of tankers is stoking declines in rates. So far this year, the number of vessels has expanded by about 4.5 percent to 495, according to data from London-based shipbroker Galbraith's Ltd.

At the same time, OPEC's cutbacks have helped to trim the volume of crude carried by tankers by 5.2 percent to 466 million barrels, according to estimates from Halifax, England-based consultant Oil Movements Ltd.

``That's simply because of OPEC cut production,'' said Oil Movements founder Roy Mason. ``OPEC produces less oil, so there are fewer shipments.''

Dahlman Rose sees IPOs from 30 shippers by end '08

Dahlman Rose sees IPOs from 30 shippers by end '08
Jun 19, 2007
By Nick Carey

Within the next 18 months the maritime shipping sector could generate up to 30 initial public offerings due to global demand for everything from coal to consumer goods, an industry financier said on Tuesday.

"What's interesting in this sector is that we're seeing rising production combined with rapidly growing demand," said Simon Rose, chief executive of Dahlman Rose, a New York-based boutique investment bank for the energy supply chain sector.

He added that within a year the U.S. markets should see their first IPO from the operator of a fleet of special tankers used to store or move oil from offshore platforms.

Dahlman Rose is currently working on two other offerings that will be announced by the end of June, one in the coal industry, one in offshore drilling. Rose declined to give details.

He said the maritime shipping IPOs over the next 18 months will be primarily focused on the dry bulk sector, with a handful of container shipping companies that haul consumer goods in containers and oil tanker companies.

Dry bulk ships haul bulk commodities like coal, iron ore and agricultural products, with demand driven in part by rapidly growing Asian economies like China and India.

"We've seen a huge growth in iron ore and coal production, and ports are struggling to deal with the extra demand," Rose said. "We expect this situation will continue for some time."

Since Dahlman Rose was founded in 2004 -- Simon Rose is co-founder along with Ernest Dahlman -- the firm has lead managed or co-managed some 20 IPOs or secondary offerings worth around $3.8 billion, primarily in maritime shipping.

At the end of May, the firm opened a new group focused on exploration and production plus oilfield services, which Rose said reflected the global drive for new energy sources.

"We're going to see more deep sea drilling further offshore," Rose said. "Onshore, we're going to see opportunities for companies using different technologies to drill for oil."

Offshore platforms will require Floating Production, Storage and Offloading vessels (FPSOs) -- tankers specially designed to safely take and store oil from these platforms at sea, then transfer them to shuttle tankers to transport to shore.

Rose said there is investor interest in the United States in seeing an FPSO operator -- most operators are currently based in Norway -- either launch an IPO here or dual-list its stock on a U.S. market.

Earlier this month Dahlman Rose arranged the sale of 25.5 million shares of FPSO operator Sea Production, which were owned by Norwegian tanker company Frontline Ltd. , to institutional investors.

The investment bank is also lead manager on the sale of 2.05 million shares in a secondary offering for Tulsa, Oklahoma-based oil and gas exploration company Arena Resources Inc. , which should close Wednesday.

"Arena has done some tremendous work using new technologies in oilfields that were not worth drilling when oil was trading at far lower levels," Rose said.

Seven Changes to Tanker Company Forecasts

Overseas Shipholding Upgraded by JPMorgan on Valuation Change
By Alaric Nightingale
July 6 (Bloomberg)

Shares of Overseas Shipholding Group Inc., the largest U.S.-based oil-tanker owner, were upgraded by analysts at JPMorgan Chase & Co., who said they previously valued the company's fleet of ships incorrectly.

Analysts in New York led by Jonathan Chappell raised their rating to ``overweight'' amid seven changes to their forecasts for tanker companies. The bank's recommendation on Overseas Shipholding had been ``neutral,'' according to data compiled by Bloomberg.

Management meetings uncovered value ``previously ignored by us'' in the vessels New York-based Overseas Shipholding has leased from other shipping lines, ``rendering the shares still inexpensive,'' the analysts wrote in a report published today.

JPMorgan's other actions were all changes to profit estimates. Frontline Ltd., the world's biggest oil-tanker company by capacity, is likely to have made more in the second quarter than the bank previously expected because of higher-than-estimated rental rates for its vessels.

JPMorgan cut its earnings estimates for General Maritime Corp., Tsakos Energy Navigation Ltd. and Top Tankers Inc., and raised the estimates for Nordic American Tanker Shipping Ltd. and Double Hull Tankers Inc.

FRO, GMR, OSG, TNP, DHT, NAT, TOPT

Frontline Shares Rise Most in a Month (FRO)

Frontline Shares Rise Most in a Month on Expected OPEC Supply
By Grant Smith
July 4 (Bloomberg)

Shares of Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, rose the most in more than a month on expectations of increased OPEC supply and as futures contracts indicated freight rates will rally.

The Organization of Petroleum Exporting Countries will probably accede to calls for increased output in the second half of the year as countries in the northern hemisphere seek to bolster stockpiles in preparation for winter fuel demand, according to Anders Kirkhorn Rosenlund, an analyst at ABG Sundal Collier ASA.

``We think OPEC will increase production,'' Rosenlund, who has a ``hold'' recommendation on Frontline shares, said in a telephone interview from Oslo. The share gain was aided by trading in tanker futures contracts, which ``suggest freight rates will more than double'' over the next five months, Rosenlund said.

Futures contracts on the benchmark route between the Persian Gulf and Japan show an increase of 119.2 percent between the front and fifth months, according to data provided by Oslo-based derivatives broker Imarex NOS ASA.

Shares of Hamilton, Bermuda-based Frontline closed up 15.5 kroner, or 5.7 percent, at 287 kroner in Oslo, their biggest gain since May 31. The shares have advanced 5 percent this week, valuing the company at 21.5 billion kroner ($3.69 billion).

Frontline Is Upgraded (FRO)

Frontline Is Upgraded by Fondsfinans on OPEC Outlook
By Alaric Nightingale
June 19 (Bloomberg)

Shares of Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, were upgraded by Norwegian stockbroker Fondsfinans ASA on expectations OPEC will pump more oil, boosting shipping demand.

Analysts led by Arne Roenning in Oslo raised their recommendation on Frontline's shares to ``buy'' from ``sell'' in a note to clients today.

They also increased their share-price target for the Hamilton, Bermuda-based shipping line to 350 Norwegian kroner ($58.12) from 250 kroner. The stock rose 4 kroner, or 1.5 percent, to 276 kroner in Oslo.

``We expect OPEC to open up the tap in the second half to keep crude prices at sustainable levels,'' the analysts wrote. ``The effect will be rising tanker demand and freight rates.''

The Organization of Petroleum Exporting Countries will have to produce an extra 1.7 million barrels a day next year to keep global supply and demand balanced, Fondsfinans said, citing estimates by Energy Market Consultants.

``Last time we saw an increase of this magnitude was in 2004,'' the analysts said. ``The effect was record-high tanker rates'' of $250,000 a day for the largest class of supertankers known as very large crude carriers, or VLCCs.

FRO

No collapse forecast as tanker rates fall near year lows

The world's leading crude oil freight routes from the Gulf were close to their lows for this year on Monday but analysts said the freight market was not on the brink of collapse.Industry sources also said there was no sign that crude demand was faltering, blaming the weakness on the dynamics of the tanker market instead. Ship brokers said VLCC freight rates from the Gulf to Japan, the world's benchmark crude route, were trading at an average of WS60, close to a year low of WS52 hit in January. Rates for double-hulled units were trading five Worldscale points higher and single-hulled tonnage up to 10 points lower. Below that level, a three-and-a-half year low was in sight at WS50.5, struck in October 2003, according to Reuters data. Analysts said rates were pressured by long-standing Opec cuts, refinery maintenance in Asia, high stocks in the United States and bulging ship supply. They said there was no evidence that crude oil demand was being eroded, pointing instead to strong demand for long-haul oil into China, which was buoying rates. "We wouldn't speak of it as a freight collapse...but it does seem to have moved into a softer summer trading market that we've had in previous years," said Claire Grierson, an analyst with Simpson, Spence & Young in London.

E.A. Gibson shipbrokers said VLCC voyage rates to Japan were trading at WS105 or $67,200 a day in June 2006 compared with WS59 or $34,750 on Monday.

In a report it also cited the VLCC and ULCC fleet rising to 494 by mid-2007 from 477 in mid-2006.

Rates for VLCCs from the Gulf to the US were similarly pressured, trading at an average of WS50, five points short of a low for the year.

Beyond that, costs on the major route were close to a four-year low of WS42.50 hit in August 2003.

Brokers said that the rates averaged $30,000 to $40,000 a day to Asia, down from closer to $50,000 in the last couple of weeks.

Source: Reuters
July 5th, 2007

Overseas Shipholding Shares Rise

Overseas Shipholding Shares Rise to Record on Outlook
By Todd Zeranski
July 5 (Bloomberg)

Shares of Overseas Shipholding Group Inc., the largest U.S.-based oil-tanker owner, rose for a third day this week, touching a record, on improved earnings prospects because of high oil prices and strong demand for vessels to supply refiners.

The company has been helped by an ``underlying bullishness on the outlook for the second half for tankers,'' Omar Nokta, an analyst at Dahlman Rose & Co. in New York, said today in an e- mailed message. Nokta rates Overseas Shipholding shares a ``buy'' and owns none.

Shares of New-York based Overseas Shipholding rose $1.82, or 2.1 percent, to $88.27 in New York Stock Exchange composite trading after touching a record $88.77 earlier in the day. The stock has risen 8.4 percent this week and is 48 percent higher than at this time last year.

Crude oil for August delivery rose to a 10-month high of $71.81 a barrel today on the New York Mercantile Exchange, extending an 18 percent rally this year on strong demand for gasoline and concern over possible supply disruptions.

G. Scott Burk, an analyst at Bear Stearns Cos., raised his second-quarter and full-year earnings estimates for Overseas Shipholding on July 2, citing high rates for the company's Very Large Crude Carriers, or VLCCs, and Aframax tankers.

Slightly more than half of the company's ships have yet to be booked for 2008, enabling it to benefit from an expected increase in rates, Burk said in a note to clients.

The analyst raised his second-quarter profit estimate to $1.64 per share from $1.32 and his full-year estimate to $7.08 from $6.86. Burk rates the company's stock at ``peerperform.''

Persian Gulf Tanker Rates Snap Nine-Day Slump

Persian Gulf Tanker Rates Snap Nine-Day Slump on Ship Supplies
By Grant Smith
July 2 (Bloomberg)

The cost of transporting Middle East crude to Asia on supertankers snapped a nine-day slide as the number of spare vessels dwindled.

The number of vessels available for hire next month has shrunk about 8 percent since June 29 because of a series of bookings that day, according to a report e-mailed today by Paris- based shipbrokers Barry Rogliano Salles. There are 99 tankers free today, compared with 108 on June 29.

``It looks like it's bottomed out,'' shipbroker Halvor Ellefsen of Sealeague AS said in an e-mail from Oslo.

Freight rates for very large crude carriers, or VLCCs, on the benchmark route to Japan rose to 60.1 Worldscale points on June 29, the last assessment available from London's Baltic Exchange. Rates fell 21 percent last month as Asian refiners reduced imports while performing seasonal maintenance.

At 60.1 Worldscale points, owners of modern VLCCs can earn about $31,037 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 on May 30 that it needs more than $29,500 a day to be profitable on each of its VLCCs.

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

crude oil, oil, companies, oil tankers, oil tanker, vlcc, Suezmax, Aframax,

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.

Asian Aframax Ship Rate Gains

Asian Aframax Ship Rate Gains May Be Limited on Rising Supply
By Katherine Espina
June 21 (Bloomberg)

Gains in the cost of shipping 80,000 metric tons of oil on Asian routes may be curbed in the next several days as the supply of tankers increases, brokers including Matsui & Co. said.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait climbed for a second day, gaining 1.7 percent to 148.27 yesterday, according to the London-based Baltic Exchange. Shipment cost on the route fell 1.2 percent in the week ended June 15, the first decline in three weeks.

``There will be many vessels available in the Singapore area in the early part of July so the market may stay the same or even move lower,'' Kats Nishikawa, general manager at the chartering team of Matsui & Co. in Tokyo, said by phone. ``Unless we see more activity in the Singapore area, the market may be softer.''

This month, there are 12 Aframax tankers sailing to Singapore, according to AISLive on Bloomberg. The cost of shipping crude on Aframax vessels to Asian routes has declined 7.4 percent this year as capacity expanded.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 19 percent this year. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $1.97 as of June 20, unchanged for the previous 19 days, according to Bloomberg data.

Japan Bound

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50, the daily cost for the past 12 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, steady for the past two weeks, according to Bloomberg data.

The cost of shipping gasoline and other so-called clean petroleum products to Asia declined yesterday, according to the Baltic Exchange.

The cost of shipping 30,000 tons of oil products from Singapore to Japan fell 0.6 percent to Worldscale 200.42 yesterday, the lowest in eight weeks. It has slumped 20 percent the past four weeks, based on data from the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East dropped 2.2 percent to Worldscale 161.92, the lowest since Feb. 15. The rate has fallen 17 straight days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for an eighth day. The rate dropped 1.5 percent to Worldscale 131.46 yesterday, the lowest in four months, Baltic Exchange data showed. The cost of shipping on the route fell 3.2 percent last week, the second weekly decline.