Bloomberg Roundup September 23rd

Buy Futures for Persian-Gulf Oil Tankers, Deutsche Bank Says
By Grant Smith
Sept. 21 (Bloomberg)

Investors should buy futures contracts for tankers shipping crude from the Middle East because Saudi Arabia will probably raise output, Deutsche Bank AG said.

Freight rates for supertankers hauling crude cargoes from the Persian Gulf to Japan, a route known as TD3, are close to a four-year low as fleet expansion outpaces growth in demand for oil. Saudi Arabia is set to contribute the largest share of a 500,000 barrel-a-day output increase to be implemented by the Organization of Petroleum Exporting Countries from Nov. 1.

``Any increase in Saudi production we expected would be reflected in a rally in TD3 rates,'' Deutsche Bank analysts including Michael Lewis in London and Adam Sieminski in New York said in a report today. ``We find that Middle East oil production has tended to be loosely correlated with TD3 freight levels.''

A rise in shipping costs would be the first indicator that Saudi Arabia intends to deliver on the OPEC pledge and reverse the 1 million-barrel-a-day production cut implemented from the start of the year, the analysts said.

Freight rates for the TD3 route fell to a four-year low of 48.94 Worldscale points on Sept. 13, according to the London- based Baltic Exchange.

Persian Gulf Oil Tanker Rates Increase the Most in Four Weeks
By Grant Smith
Sept. 21 (Bloomberg)

The cost of transporting Middle East crude oil to Asia, the busiest market for supertankers, posted its biggest gain in four weeks as bookings accelerated for ships loading in October.

There have been 34 October bookings reported this week by Paris-based shipbroking firm Barry Rogliano Salles, compared with 21 the week before. Hire rates have advanced amid simultaneous bookings for vessels on the same dates next month, said Barry Rogliano broker Mathieu Philippe.

``Sentiment has changed,'' Philippe said by telephone from Dubai. ``I would anticipate October's going to be more active than September, and rates are going slightly higher.''

Rates for very large crude carriers, or VLCCs, hauling crude from the Persian Gulf to Japan rose 12 percent to 58.3 Worldscale points yesterday, the biggest daily increase since Aug. 22, according to London's Baltic Exchange. Rates fell to a four-year low of WS 48.9 on Sept. 13 as the growth in the global fleet of tankers outpaced the increase in demand for oil.

``Owners realized it was better keeping ships idle, and an artificial shortage was created,'' Philippe said. Some owners may be making a loss on the tankers they hire because of record prices for ship fuel and declining freight rates.

At WS 58.3, owners of double-hulled VLCCs can earn about $24,166 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.

Asian Aframax Tanker Rates Fall on Bookings Dearth, Ship Glut
By Katherine Espina
Sept. 21 (Bloomberg)

Asian rates for tankers that can carry 80,000 metric tons of oil may extend a decline next week from a three-week low as the pace of bookings slowed, increasing the number of vessels competing for cargo.

The aframax tanker rate for transporting oil from Kuwait to Singapore, the world's fourth-busiest route for such vessels, fell 0.31 percent to Worldscale 120.58 yesterday, its third day of decline, according to data from the London-based Baltic Exchange. Shipping a ton of fuel on the route costs $12.46, according to Bloomberg data.

Aframax rates dropped 3 percent last week as bookings stalled in the third quarter, a typically slow period. One aframax tanker carrying 106,680 tons of cargo is scheduled to arrive in Singapore next week from six tankers, capable of carrying 621,445 tons, this week, Bloomberg data showed.

Ship-owners had difficulty maintaining rates last week as there were ``too many ships relative to chartering activity,'' Dnb NOR Markets analysts Henrik With and Glenn Lodden said in their report. ``Vessel availability is still massive, which will act to cap the potential for any significant increase.''

Almost 60 million deadweight tons of double-hull aframax tankers were in service at the end of 2006, and the fleet is expected to rise to over 80 million tons at the end of 2009, according to France-based shipbroker Barry Rogliano Salles.

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

OPEC Cargoes May Rise 0.6% in Month to Oct. 6, Consultant Says
By Grant Smith
Sept. 20 (Bloomberg)

OPEC's daily shipments of crude will probably rise 0.6 percent in the four weeks to Oct. 6 from the previous month after the group agreed to increase output, the consultant Oil Movements said.

The Organization of Petroleum Exporting Countries will load an estimated 24.19 million barrels a day onto tankers, compared with 24.05 million in the month ended Sept. 8, the Halifax, England- based consultant wrote in a report today.

The 10 OPEC members bound by quotas decided at a Sept. 11 meeting in Vienna to raise production by 500,000 barrels a day to relieve the effect of record prices on global economic growth.

Shipments from the Middle East will increase 0.3 percent to an average 17.25 million barrels a day, from 17.2 million barrels in the four weeks to Sept. 8, Oil Movements said. The total amount of oil on tankers will climb 0.3 percent to 458.54 million barrels, it predicted.

Persian Gulf Tanker Rates Extend Advance as Owners Stand Firm
By Grant Smith
Sept. 20 (Bloomberg)

The cost of transporting Middle East crude oil to Asia, the busiest market for supertankers, rose for a fourth day as shipowners refused to offer discounts.

Owners of very large crude carriers, or VLCCs, may already be losing money on the vessels they hire out as record oil prices sap demand and the global fleet expands. Rates have rebounded 6.3 percent from a four-year low on Sept. 13.

``Owners have been able to take the initiative even when volumes are not so high,'' Finn Engelsen, managing director of shipbroker Lorentzen & Stemoco, said by phone from Oslo. ``But you need a stronger inducement for a rally, and we are not going to get a rally with these economic conditions.''

Rates for VLCCs hauling crude from the Persian Gulf to Japan rose to 52.03 Worldscale points yesterday, according to London's Baltic Exchange. Hire costs have also gained because of Typhoon Waipha off China and tropical storms near the Gulf of Mexico. Strong winds can delay tankers and reduce vessel supplies.

At 52.03 Worldscale points, owners of double-hulled VLCCs can earn about $17,421 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.