Persian Gulf Tanker Rates Rise Most in 20 Months

Persian Gulf Tanker Rates Rise Most in 20 Months; Demand Jumps
By Alaric Nightingale
Aug. 23 (Bloomberg)

The cost of shipping Middle East crude to Asia, the world's busiest market for supertankers, climbed the most in 20 months and may extend its rally as cargo demand strengthens.

September demand is outpacing that of August ``by a long way,'' Tim Coffin, an analyst at London-based Capital Shipbrokers LP, said in an e-mailed note today. Tanker-hire prices are ``firming fast,'' he said, ``we didn't expect it.''

Some cargo loadings may have been delayed from August to September, he said, reducing tanker demand.

Sinochem Corp., China's biggest petrochemicals trader, hired the tanker Iran Nesa at a rate of 72.5 Worldscale points, according to a report from Oslo-based PF Bassoe AS today. That's 16 percent above the London-based Baltic Exchange's benchmark rate of 62.7 points for cargoes to Asia.

The exchange's rate climbed 20 percent yesterday, the biggest one-day gain since Jan. 22 last year.

At 62.7 Worldscale points, owners of double-hulled VLCCs can earn about $33,030 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. Yesterday, they were making $19,881 a day, based on the same calculations.

Frontline Ltd., the world's biggest VLCC operator, said today it needs $30,000 a day to break even on each of the supertankers.

Too Many Ships

Still, there are too many ships for hire, according to a report from Paris-based shipbroker Barry Rogliano Salles today. There are likely to be about 70 more cargoes loaded in September, based on average monthly demand. By contrast, 100 vessels can reach the Middle East by Sept. 23, the broker said.

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.

Freight Rates and Seasonality

From McQuilling Services report - August 15th, 2007:
Freight Rates and Seasonality


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http://www.mcquilling.com/pdfs.asp?ID=Freight%20Rates
click on link for PDF of full report

Oil-Shipping Rates Fall

Oil-Shipping Rates Fall, Dry-Bulk Rises on Demand
By Todd Zeranski and Katherine Espina
Aug. 16 (Bloomberg)

Shipping rates for oil are plunging as turmoil in credit markets threatens growth, while the cost to haul bulk commodities such as coal and grain rises to a record because of increased demand in China and India.

Concern that falling stock prices may cause economic expansion to slow, reducing fuel demand, caused crude oil to fall more than $2 a barrel today. U.S. oil prices have dropped 11 percent since reaching a record $78.77 on Aug. 1.

This worry, coupled with a traditionally slow summer tanker season, has had an effect on spot oil-tanker rates. The cost of shipping Middle East crude to Asia has fallen by half since March, and rates in the Caribbean, where ships from Colombia, Venezuela and Mexico ferry oil to U.S. refineries, have fallen 41 percent since July 23.

``Dry bulk is on fire,'' Omar Nokta, a managing director at Dahlman Rose & Co. in New York, said in an interview. ``If you put a dry-bulk tanker away (on contract) for three years, you get 20 percent returns. For crude, its 12 percent.''

Rising raw material consumption led by China and India and port bottlenecks in countries including Australia and Brazil, have been pushing the overall Baltic Dry Index to records since Aug. 10. The line of ships waiting to load cargoes in Australia's Newcastle, the world's biggest export harbor for coal, rose to 55 on Aug. 13 from 51 a week earlier, Newcastle Port Corp. said.

Shipping Costs

The Baltic Dry Index, an overall measure of commodity- shipping costs on different routes and ship sizes, added 1.2 percent to a record 7,319 today, according to the Baltic Exchange.

The index has risen 66 percent this year. The rate of hiring capesize ships, the largest type of bulk carriers, rose to a record with gains trickling down to smaller vessels.

``The previous 2008 assessment for capsizes was for an average of $82,000, and now that's changed to $98,000,'' Nokta said. ``At the same time all these dry bulk stocks are down. It's running contrary to what is happening.''

The Baltic Capesize Index, a measure of rates for that class of vessel on different routes around the world, advanced 1.8 percent to a high of 10,010 today, according to the London- based Baltic Exchange. The rate to hire a capesize carrier, which typically hauls 175,000 tons of goods, increased $2,637, or 2.3 percent, to a record $118,425 a day on average, data from the Baltic Exchange showed.

The Baltic Supramax Index, made up of five time-charter routes for that type of vessel, which can haul between 50,000 tons and 59,999 tons of goods, gained 0.3 percent to 4,801. It's been setting records since July 13.

Handysize Rates

The Baltic Handysize Index, which tracks rates on six routes for that type of ship, gained 0.4 percent to a record 2,468 today, according to the Baltic Exchange. It's been closing at daily highs since July 18.

Shares of Diana Shipping Inc. shares have fallen 26 percent this month. Genco Shipping & Trading Ltd. shares have fallen 18 percent, while Eagle Bulk Shipping Inc. shares have fallen 14 percent and DryShips Inc. shares down 13 percent.

Cantor Fitzgerald maintains Buy on Tsakos (TNP)

Tsakos Energy Navigation "buy," target price raised
August 06, 2007
(newratings.com)

Analysts at Cantor Fitzgerald maintain their "buy" rating on Tsakos Energy Navigation Ltd (ticker: TNP), while reducing their estimates for the company. The target price has been raised from $79 to $85.

In a research note published on August 3, the analysts mention that the company has posted its 2Q07 operating EPS ahead of the estimates and the consensus mainly on account of higher-than-anticipated charter rates. Tsakos Energy Navigation’s substantial charter coverage, widespread newbuilding programme and well-balanced mix of crude and product carriers are likely to help the company to withstand any volatility in rates in the near term, the analysts say. The EPS estimate for 2007 has been reduced from $7.30 to $7.21 to reflect the current spot rate scenario.

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 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.

Frontline Downgraded by UBS

Frontline Shares Downgraded by UBS on Outlook for Rental Rates
By Alaric Nightingale
July 13 (Bloomberg)

Shares of Frontline Ltd., the world's largest oil-tanker company by capacity, were downgraded by UBS AG, which said ship-rental rates are poised to fall, cutting the shipping line's ability to pay dividends.

UBS analysts led by Dominic Eldridge in London cut their rating on the stock to ``reduce 2'' from ``neutral 2'' in a note to clients today.

The ``12-month trend'' for tanker-rental rates is ``poor'' because of the supply and demand outlook, the analysts wrote.

Frontline's dividend payout, calculated by UBS at about 11 percent for this year, is ``totally dependent on earnings, which are themselves almost totally dependent upon the level of spot tanker rates,'' they said.

Weekly Oil Tanker Rates - July 6th, 2007 (update)

weighted average of weekly oil tanker rates
chart, graph, crude oil, oil tanker, oil tankers, tanker rates, freight

click on image for full screen view

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).

Worldscale VLCC Freight Rates Yearly Chart

Wordscale Chart of VLCC Freight Rates July 2006 - June 2007


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(source: Simpson, Spence & Young)

VLCC Chart of Average Earnings US$/day

VLCC Chart of Average Earnings US$/day


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(source: BRS Annual Review 2007)

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.

IEA June 2007 Report on Tanker Rates

Crude freight rates gradually eased from near the top of five-year ranges in early May to finish the month below seasonal averages. Floating storage charters in the US Gulf and some increased long-haul trading restrained crude tanker supply. This prevented a dramatic slide in dirty rates, despite Nigerian outages and muted OPEC exports continuing to undermine vessel demand. Refinery maintenance in Asia supported product trade and demand for clean tankers. Low stocks and refinery outages maintained the need for gasoline imports into the US in May.

Trade data reveal that Nigeria was the third-largest provider of crude to the US in March, above Saudi Arabia for the first time. However, extensive outages have now reduced Nigerian export cargoes. OPEC cuts remain in place and Vela spot charters for June are reportedly near three-year lows. Furthermore, refinery maintenance, now focussed on Asia, usually undermines vessel demand in May. Despite these factors, VLCC freight rates had fallen only slightly below five-year averages by the end of May. Middle East Gulf rates to Japan and the US Gulf in early May were well above average, reaching around $13/tonne and $22/tonne respectively. One month later, rates for both routes had only dropped by around $2/tonne. They remain higher, on a $/tonne basis, than almost all rates seen between mid-October and February.

One factor supporting rates has been the reductions to vessel supply caused by the increased use of VLCCs as floating storage in the US Gulf. The prevailing wide contango in WTI has made it economic to charter VLCCs specifically for floating storage. Some VLCCs arriving in the US Gulf with valuable African crude have also invoked a clause to store offshore before discharging.

Vessel supply has been further reduced by incremental long-haul chartering. Asian purchases of West African crude reportedly hit 14-month highs for June on increased buying from China and evidence of the first cargoes for Indonesia in more than a year. Clearly Nigerian exports may be disrupted, but Angolan loading schedules suggest exports there will increase. Furthermore, Indian refiners have been increasingly looking to Mediterranean crude markets and there has even been a recent Chinese purchase of Canadian crude.

Elsewhere in the dirty sector, Nigerian outages caused westbound Atlantic Suezmax rates to weaken by $2-3/tonne in May. Cross-Mediterranean Aframax rates showed their volatility again by falling from sixmonth highs of $21/tonne in early May to 18-month lows of $7/tonne in early June. Aframax demand in June has been dented by a rise in Russian export duties and North Sea maintenance.

Clean product tanker rates rose in May. Asian clean rates were supported by increased trade of productsduring refinery maintenance. Rising Asian petrochemical capacity continues to boost demand for naphtha imports from Saudi Arabia and India. In the Atlantic basin, discharging delays caused an unusually large vessel backlog at Lagos port in late May, temporarily reducing vessel supply. Transatlantic clean rates were further boosted by the continued need for gasoline imports in the US, where stocks remain historically low. UK continent to US Atlantic Coast rates for 33,000-tonne clean cargoes rose by $4/tonne from the start of May to reach $28/tonne in early June.