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.