Asian Aframax Rate Gains Most Since 2005

Asian Aframax Rate Gains Most Since Feb. 2005 on Yearend Demand
By Katherine Espina
Dec. 12 (Bloomberg)

Asian aframax rates rose the most in two years and nine months, benefiting from higher costs for chartering bigger tankers and boosted by increased shipments for January ahead of the yearend holidays.

The rate to transport 80,000 metric tons of fuel from Kuwait to Singapore jumped 12 percent yesterday to Worldscale 233.75, according to the London-based Baltic Exchange. The gain is the biggest since Feb. 23, 2005, when the rate rose 16 percent. Shipping a ton of fuel on the route costs $19.94, based on Bloomberg data.

Hiring rates of supertankers, also known as very large crude carriers or VLCCs, on the Middle East to Far East routes have risen almost four percent since November, prompting charterers to split cargoes so smaller ships like suezmaxes and aframaxes can move them. Supertanker rates may extend gains after an oil spill in South Korea last week involving a single- hull vessel increased speculation of more demand for two-hull tankers.

``There is a knock-on effect from VLCC rates rising,'' Takeshi Ando at the tanker team of shipbroker Matsui & Co. in Tokyo said. ``Aframax owners don't like to offer below VLCC rates so I expect this sector will still go up,'' Ando said by phone.

The hiring rate for a supertanker on the Middle East-Japan route rose 5.5 percent yesterday to Worldscale 227.19, advancing more than fourfold since the start of the year, according to the Baltic Exchange's data. A supertanker on the Middle East-Singapore route gained 5.6 percent to Worldscale 231.56, its fourth day of gains.

Winter Demand

Aframax rates on the Middle East-Singapore route surged 4.5 percent last week, bringing gains in the past eight weeks to 78 percent, as transport demand rose to meet fuel needs for the Northern Hemisphere winter and shipowners passed on the additional costs from higher bunker prices.

Five aframaxes, capable of moving a total of 543,920 tons of fuel, are scheduled to arrive in Singapore this week while one with 113,013-ton capacity will arrive next week, according to Bloomberg data. That compares with three last week, with the capacity to haul a total of 309,880 tons of fuel.

The collision between a barge and the single-hulled supertanker Hebei Spirit on Dec. 7 in South Korea spilt 10,500 metric tons (78,750 barrels) of oil, the worst oil spill in the world in four-and-a-half years.

The following is a table of rates to charter smaller tankers capable of carrying less than 1 million barrels of crude oil or oil products on Asian routes as of Dec. 11, according to the Baltic Exchange.

--------------------------------------------------------------
Route Tons Rate Change Carrier
--------------------------------------------------------------
Kuwait-Singapore 80,000 233.75 +11.86% Aframax
Persian Gulf-Japan 75,000 209.17 +0.40% Oil Product Tanker
Singapore-Japan 30,000 312.50 0% Oil Product Tanker
Middle East-Japan 55,000 251.73 +0.23% Oil Product Tanker
--------------------------------------------------------------

Aframax Rates Rise

Caribbean Tanker Rate Increases on Competition From Europe
By Todd Zeranski
Oct. 18 (Bloomberg)

The rate to transport oil from the Caribbean advanced, spurred by higher prices in European shipping markets.

``Mediterranean activity has increased, so some owners are moving there,'' said Mike Jedlicke, a broker at Dietze & Associates LLC in Wilton, Connecticut. ``That's thinning out'' the number of available vessels, straining Caribbean supply.

Stronger Aframax bookings in the Mediterranean and the Black Sea forces Caribbean-area charterers to pay higher rates to keep vessels in the region.

The average Aframax rate advanced 15 points, or 11 percent, to Worldscale 155. WS 155 is equal to about $20,325 a day, after expenses such as fuel and port fees.

The rate fell to WS 92.5 on Sept. 11, the lowest since 2001, according to Bloomberg data. Rates increased 22 percent yesterday and are up 48 percent this week.

Malaysia's Eagle Anaheim Nereo is scheduled to reach its Houston destination on Oct. 21, according to Bloomberg data.

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.

Persian Gulf Tanker Rates May Rise as Fuel Prices Crimp Income
By Alaric Nightingale
Oct. 18 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, may rise for an eighth day as soaring refueling prices continue to crimp income from rentals.

Record marine fuel, or bunker, costs mean some owners, who rented extra tankers at fixed prices anticipating rising demand in the northern hemisphere winter, may be losing about $30,000 a day when they lease out those ships in the day-to-day, or spot market, Charlie Fowle, a director at London-based shipbroker Galbraith's Ltd., said by phone today.

``The bunker factor at the moment is dramatic,'' Fowle said. ``Just to get the same return, owners need 10 to 20 percent more'' from the oil companies who book their ships.

Hyundai Merchant Marine, a South Korean shipowner, hired the tanker Hebei Spirit at a rate of 59 Worldscale points, according to a report from Athens-based Optima Shipbrokers today. That's 3.5 percent above the London-based Baltic Exchange's benchmark assessment of 57.03 Worldscale points for cargoes to Asia.

Hebei Spirit should normally cost less to hire than the benchmark because it's fitted with one steel hull separating its cargo from the ocean. The exchange's assessment also includes carriers with two steel hulls that cut the risk of an oil spill in the event of an accident and usually have better engines.

At 57.03 Worldscale points, owners of double-hulled very large crude carriers, or VLCCs, can earn about $20,024 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 prices.

A week ago, the same rate of 57.03 points would have earned $3,500 a day more when the cost of bunkers was 9 percent cheaper.

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.

Asia Rates Fall to Lowest in 5 Months

Asia Aframax Tanker Rates Fall to Lowest in Almost Five Months
By Katherine Espina
Aug. 16 (Bloomberg)

The rate for tankers that can carry 80,000 metric tons of fuel or crude oil fell to the lowest in almost five months and may extend the decline until charterers book to transport September cargoes.

The rate for Aframax tankers on the Kuwait-to-Singapore route dropped 1.4 percent to Worldscale 127.29 yesterday, the lowest since March 20, according to data from the London-based Baltic Exchange. It has declined 3.7 percent in the past four days. That puts the cost of shipping a ton of oil on the route at $13.46, Bloomberg data showed.

``There's been very few activity for some time,'' Takeshi Ando, a shipbroker at Matsui & Co's tanker team, said by phone from Tokyo. ``There have been short-haul fixtures in the Indonesia area but no long-haul.''

There were nine tankers scheduled to arrive in Singapore last week and another two this week, capable of carrying a total of 1.2 million tons of cargo, according to Bloomberg data.

The cost of moving 80,000 tons of oil to Japan from Indonesia was at Worldscale 127.50 yesterday, unchanged from Aug. 15, according to Bloomberg data. That puts the cost of shipping a ton of oil on the route at $11.12.

The rate on the Indonesia to Japan route may hover at around Worldscale 120 this week, Matsui's Ando said.

``There's just too many ships available for spot business, and tanker rates should therefore remain low going forward,'' DNB Nor Markets analysts Glenn Lodden and Henrik With said in their weekly report. DNB Nor Markets is a division of DNB Nor Bank ASA, Norway's biggest bank.

Oil Products

The cost of transporting gasoline, diesel and other oil products on medium- to long-range tankers were lower yesterday. The rate of shipping 30,000 tons of oil products to Japan from Singapore declined 0.2 percent to Worldscale 222.08, according to the Baltic Exchange. It lost 8.9 percent in the past 12 days.

The cost of moving 55,000 tons of products to Japan dropped 0.6 percent to Worldscale 185.63, the lowest in five weeks.

The rate for shipping 75,000 tons of oil products fell 0.5 percent to Worldscale 153.86 yesterday, based on data on the Baltic Exchange.

Asian Aframax Tanker Rates

Asian Aframax Tanker Rates May Extend Drop on Lack of Cargoes
By Katherine Espina
Aug. 7 (Bloomberg)

The rate for shipping oil on Asian routes on tankers that can carry 80,000 metric tons fell a third day and may extend its decline because of a lack of cargoes.

The rate for aframax tankers on the Kuwait-to-Singapore route dropped 2.3 percent to Worldscale 130.77 yesterday, the lowest in more than two weeks, according to data from the London-based Baltic Exchange. That puts the cost of shipping a ton of oil on the route at $13.96, Bloomberg data showed.

``The market's very quiet as I don't see many fixtures,'' Katsunori Nishikawa, general manager of the chartering team at the shipbroking division of Matsui & Co. in Tokyo, said by phone today. There aren't ``any long-haul voyages like from Indonesia to Korea or Japan, just short trades.''

Six aframax tankers, which can carry 596,373 tons of fuel, are expected to arrive in Singapore in the next two weeks, compared with four that were capable of carrying 431,749 tons of cargo last week, according to Bloomberg data.

Bookings for August haven't been enough to drive charter rates higher for aframax tankers on east of Suez routes, according to shipbrokers including London-based Galbraith's Ltd. The rate on the Kuwait-to-Singapore route for an aframax tanker averaged Worldscale 136.58 in July, 6.9 percent below this year's average.

``Dwindling aframax interest caused rates to ease to Worldscale 130,'' for voyages to the East, London-based E.A. Gibson Shipbrokers Ltd. said in its weekly report.

The cost of moving 80,000 tons of oil to Japan from Indonesia was at Worldscale
132.5 yesterday, unchanged from Aug. 1, according to Bloomberg data. That puts
the cost of shipping a ton of oil on the route at $11.55.

``The Indonesia/East market was a little less active but the trend there remains
steady at Worldscale 130,'' Galbraith's said in its weekly report.

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

The cost of transporting gasoline, diesel and other oil products on medium- to long-range tankers fell yesterday. The rate of shipping 30,000 tons of oil products to Japan from Singapore declined 0.7 percent to Worldscale 230.42, according to the Baltic Exchange. The cost of moving 55,000 tons of products to Japan dropped 0.5 percent to Worldscale 195.58.

Shipping 75,000 tons of oil products fell 0.6 percent to Worldscale 147.29 yesterday, the first decline in more than two weeks, based on data on the Baltic
Exchange.

Caribbean Tanker Rates Decline

Caribbean Tanker Rates Decline as Availability Exceeds Demand
By Todd Zeranski
Aug. 6 (Bloomberg)

Rates to transport oil from the Caribbean basin fell for a third day as the number of ships available for transport exceeds demand.

Rates have declined about 37 percent since July 23, falling for 10 of the last 11 business days.

Shipbrokers including New York-based Poten & Partners and Houston-based Lone Star, R.S. Platou listed an average rate of Worldscale, or WS, 105 and 110, respectively, to contract an Aframax tanker, which can carry about 600,000 barrels of oil. That's an average decline of about 11.3 percent from August 3.

London-based Galbraith's didn't list a rate as of 10:45 a.m. New York time today.

With other tanker markets also declining, shipowners have little option but to wait in the area.

The market is characterized by an ``abundance of tonnage available to charterers,'' Galbraith said in an August 3 note. Tanker owners are seeing ``no refuge in the Mediterranean or North Sea.''

Three Aframax tankers, the most common vessels used to transport oil in the region, were contracted today.

One each was contracted to transport oil to the U.S. Gulf Coast from the east coast of Mexico by Royal Dutch Shell Plc and Valero Energy Corp., respectively, according to Lone Star's daily listing.

Three Tankers Contracted

Petroleo Brasileiro SA contracted an Aframax to move oil between St. Lucia and the U.S. Gulf Coast, the broker said.

A rate of WS 105 is equal to about $8,017 a day after expenses such as fuel and port fees, according to Poten & Partners.

General Maritime Corp., the second-largest U.S. tanker owner behind Overseas Shipholding Group Inc., has a break-even rate of about $12,000 per day. The New York-based company operates many of its vessels in the Caribbean.

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

The Caribbean is the world's third-largest Aframax market after the Mediterranean and Southeast Asia.

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.

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

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.''

Crude Oil and Product Tanker Voyage Freight Rates

Charts from June 2007 IEA Oil Market Report

Asian Aframax Rate Drops First Time in 6 Days

Asian Aframax Tanker Shipping Rate Drops First Time in Six Days
By Katherine Espina
June 27 (Bloomberg)

The cost of shipping 80,000 metric tons of oil on Asian routes dropped the first time in six days as most bookings for early July have been concluded. Further declines may be limited as freights for the rest of the month are fixed.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait dropped 0.13 percent to Worldscale 154.42 yesterday, according to the London-based Baltic Exchange. Last week, it rose the most since March 30.

Asian freight rates for shipping oil on Aframax tankers increased 6 percent last week as charterers hired vessels to load fuel, brokers including London-based Galbraith's Ltd. said. Some owners of Aframax vessels expect rates to rise after vessel requirements for early next month have been fixed, Kats Nishikawa at shipbroker Matsui & Co. in Tokyo said.

``A number of fixtures have been concluded throughout the week and there are still plenty lined up,'' said Galbraith's in its report for the week ended June 22. ``This firmer trend looks set to continue next week.''

This week, four Aframax tankers are expected to arrive in Singapore and three more in the first week of July, according to AISLive on Bloomberg.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 21 percent this year. It fell 1.1 percent to 1041 yesterday, the second day the measure fell. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $2.01 yesterday, unchanged for a second day, according to Bloomberg data.

Indonesia, Japan Route

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50 on June 22, the daily cost for the past 17 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, little changed in the past three weeks, according to Bloomberg data.

The costs of shipping gasoline and other so-called clean petroleum products to Asia were mostly lower yesterday, according to the Baltic Exchange.

Shipping rate for 55,000 tons of products on the route to Japan from the Middle East dropped 0.9 percent to a four-month low of Worldscale 155.77, based on data from the Baltic Exchange. The rate has fallen 22 percent in the past 21 days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for a 12th day. The rate dropped 3.2 percent to Worldscale 124.17, the biggest drop since Jan. 23, Baltic Exchange data showed. The cost of shipping on the route fell 5 percent last week, the most in 11 weeks.

The rate of shipping 30,000 tons of oil products from Singapore to Japan rose 0.3 percent to Worldscale 198.96 yesterday, a second day of gains. It has slumped 33 percent this year.

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.