Crude oil tanker rates below levels to cover voyage costs Tuesday, 16.Aug.2011, 22:19 (GMT+3) Crude oil tanker rates on the major Middle East route fell on Monday
back below levels that allow operators to cover fuel and other variable
voyage cost.
Crude oil tanker rates on the major Middle East route fell on Monday
back below levels that allow operators to cover fuel and other variable
voyage costs as a glut of ships
put pressure on the market despite a fall in bunker fuel costs.
The
world's benchmark VLCC export TD3 route from the Middle East Gulf (MEG)
to Japan DFRT-ME-JAP slipped to W45.31 in the Worldscale measure of
freight rates, or -$801 a day when translated into average earnings,
from W45.91 or $167 a day on Friday and W46.09 or -$110 a day last
Monday.
Average earnings are calculated less costs including bunker fuel and port fees.
"Rates
will likely remain under pressure on the benchmark TD3 route in the
near term as the August cargo program comes to a close and the forward
position list remains bloated at 91 vessels," Deutsche Bank said on
Monday.
"Currently in the (MEG), the August cargo program has three
vessels for every one cargo, and September cargoes have been slow to hit
the market."
Rates turned negative for the first time on Aug. 1
since the Baltic Exchange started collating earnings equivalent data in
2008. They stayed negative for seven sessions before moving back into
positive territory.
VLCC operating costs including fixed costs are estimated at around the $10,000 a day level.
"Although
the MEG VLCC market was active last week, the rate action was
relatively uneventful ... Based upon the lower bunker prices, daily
returns for owners were effectively the same," said broker SSY.
"Ships
are expected to disappear slowly from position lists, with no great
change in rates, with oil prices likely to be the driver behind any
changes. September stems may start to appear in the coming days, but
there is ample supply to cover them."
Frontline , the world's largest
independent tanker operator, said this month it was pulling some of its
largest crude oil carriers from the market to limit its losses.
Average VLCC earnings had pushed above $10,000 a day
from June 8 before dropping again below the key level on June 27. They
have remained below $10,000 a day since then and have been negative
since Aug. 1.
Prior to the move higher in June, VLCC rates had
hovered for several weeks around or below operating costs, estimated
around the $10,000 a day level, as the market had struggled with growing
tanker availability despite healthy crude oil demand.
VLCC rates
have been volatile in recent months due to a supply overhang caused in
part by the end of a trading play, which led to storage of millions of
barrels of crude oil on tankers at sea.
VLCC rates from the Gulf to
the United States DFRT-ME-USG were at W35.08 from W35.14 on Friday and
W37.00 last Monday. VLCC rates from West Africa to the U.S. Gulf were at
W47.00 from W47.07 on Friday and W47.39 last Monday.
AFRAMAX, SUEZMAX
Cross-Mediterranean aframax tanker rates reached W89.18 from W88.63 on Friday and W88.13 last Monday.
"The
aframax sector is also fundamentally oversupplied with tonnage,
particular in the Mediterranean and Baltic Sea," Cantor Fitzgerald said. In
recent weeks the aframax Med market has been hit by turmoil in Libya,
which has reduced demand for tankers. Conflict in Syria has also
contributed to the flat to weak market tone.
Rates for suezmax tankers on the Black Sea to Med route to reached W72.08 from W71.15 on Friday and W72.69 last Monday.
"The
area is still oversupplied with tonnage, in our opinion, and the
increase in rates was likely more driven by lower bunker fuel prices
instead of an improving demand dynamic, we suggest," Cantor Fitzgerald
said, referring to the suezmax market.
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