Gulf rates could drop as tankers chase cargoes

Gulf rates could drop as tankers chase cargoes
Bloomberg
Published: January 07, 2008, 00:29

Oslo: The cost of shipping Middle East crude to Asia, the world's busiest route for supertankers, may fall for a seventh trading day as ships that are available for hire within the next several days compete on price for cargoes.

Refineries have hired ships for more than half of January's expected cargoes, according to an e-mailed report from Paris- based Barry Rogliano Salles.

At the same time, some owners failed to find cargoes at near-record rental rates and may now compete on price to haul the consignments, Mathieu Philippe, a Dubai-based broker for the company, said by phone.

"The only problem is vessels that are going to be open within 10 days are going to be cheap," he said.

"If they don't fix now, they are going to have to swallow a lot of waiting time" earning nothing. Once those carriers have found cargoes, Phillipe said he expects rental rates to rally again.

Very large crude carrier, or VLCC, rates soared in November and December after Opec increased crude oil production and amid signs Japanese refineries may have hired extra vessels to replenish stockpiles that were near their lowest in 20 years.

Royal Dutch Shell Plc, Europe's biggest oil company, hired the tanker Irene SL at a rate of 280 Worldscale points, according to Barry Rogliano.

Discharge options

That's 11 per cent above the London-based Baltic Exchange's benchmark assessment of 250.63 points for shipments to Asia.

The booking may have cost more than the benchmark because Shell took out alternative discharge options, including to the Red Sea.

Increased discharge options, especially when they include shorter-distance voyages such as to the Red Sea, normally cost more because owners can't plan follow-up voyages.

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 US 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 250.63 Worldscale points, owners of double-hulled VLCCs, can earn about $223,319 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.

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