U.S. Oil Demand to Lift Tanker Rates in June, Fearnley Says
By totalco.com, from hellenicshippingnews.com
Published: 2011.05.31
Print    Email

Strengthening U.S. demand for Middle East oil will buoy charter rates for supertankers next month as it causes ships to sail on longer journeys than normal, Fearnley Consultants A/S analyst Sverre Bjorn Svenning said.Freight costs for very large crude

carriers, or VLCCs, on the industry’s benchmark trade route to Japan from Saudi Arabia fell 0.2 percent today after gaining for a seventh straight day yesterday, according to the Baltic Exchange in London, the longest run of gains since March. Extra cargo to the U.S. would tie up ships for longer durations, limiting supply in the Persian Gulf, the world’s largest loading region.
“We understand the Americans have been much more active buying oil in the Middle East Gulf,” Oslo-based Svenning said by phone today, declining to forecast the scale of the gain in shipping costs. Fearnley Consultants is part of Astrup Fearnley, a shipbroking, investment banking and consultancy group. “The number of vessels available for letting is declining.”
Shipping billionaire John Fredriksen, chairman of Frontline Ltd., the world’s largest supertanker operator, said May 25 tanker prices would “crash” within two years, at which point he would start buying vessels. Tor Olav Troeim, an alternate director at Frontline, said the slump could last five years.
U.S. demand for Middle East oil may be strengthening because of reduced output from Libya, according to Svenning. That is prompting European refineries to buy up more Black Sea oil that would normally go to the U.S., which in turn is forcing U.S. refineries to buy from Middle East suppliers, he said.
19,700-Mile Voyage
Deliveries to the U.S. from Saudi Arabia entail a 19,700- mile round voyage, 49 percent more than for cargoes to Japan, according to data from the e-ships.net website. Shipping analysts measure demand on a ton-mile basis, multiplying cargoes by distance travelled to supply them.
Shipments from Middle Eastern producers, including from Oman and Yemen, which aren’t members of the Organization of Petroleum Exporting Countries, will be 2 percent higher at 17.79 million barrels a day in the four weeks to June 11, Halifax, England-based consultancy Oil Movements said in a report yesterday. Demand from the U.S. is strengthening, it said.
The global tanker fleet will expand 7.4 percent this year, compared with 3.2 percent growth in demand, according to the research unit of Clarkson Plc (CKN), the world’s biggest shipbroker.
Returns from the Saudi Arabia-to-Japan route have climbed 22 percent over the past week to $7,499 a day, according to the Baltic Exchange. That’s less than the $12,777 that London-based Drewry Shipping Consultants Ltd. estimates the ships need to pay crew, insurance, repairs and other running costs.
Slower Sailing
Charter costs as measured in industry standard Worldscale terms slid 0.2 percent to 52.21 points today, ending a seven-day gain, according to the Baltic Exchange. Forward freight agreements, contracts betting what that price will be in the future, traded at 60.5 points for June, according to data from Oslo-based derivatives broker Imarex ASA. (IMAREX)
Strengthening demand and slower sailing speeds have combined to reduce vessel supply, said Ben Goggin, a freight derivatives broker at SSY Futures Ltd.
“In the past when it’s been tight like this, the market has really gone for it,” he said. “If owners really make the most of it, I believe it could go toward Worldscale 70.”
Source: Alaric Nightingale, Bloomberg

View Comments(0)