Gulf tanker rates may drop again on vessel supply

(LONDON) The cost of shipping Middle East oil to Asia, the busiest market for supertankers, may fall for a fifth consecutive week as the supply of vessels exceeds cargoes and refineries wait for crude prices to drop. The supply of very large crude carriers, or VLCCs, available within 30 days has averaged 79 in 2007, the highest in at least five years, New York-based brokerage Poten & Partners said in a report on Friday. US refineries can buy crude oil cheaper in the future than for immediate delivery, leading them to import as little as possible, Oslo-based Laurentzen & Stemoco said in a report on Friday. 'The soft trend for the crude tanker market could well continue in the third quarter,' Laurentzen & Stemoco said. Stockpiles of crude oil in the US are 'way too high', the brokerage added. Singapore Petroleum Co, the only refiner traded on the city state's stock exchange, hired the tanker Hyundai Sun at a rate of 54.5 Worldscale points, according to an report on Friday from London-based shipbroker Galbraith's Ltd. That's little changed from the London-based Baltic Exchange's price of 53.69 points for the same voyage. Rates on the voyage have fallen in 10 of the past 12 weeks and are now at a two-year low. Hyundai Sun was built in 1998 and has two layers of steel separating its cargo from the ocean. Rates for such vessels usually exceed the exchange's assessment, which also takes into account single-hull tankers as old as 20 years. Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates, 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. At 53.69 Worldscale points, VLCC owners can earn about US$16,625 a day on a 25-day round trip from Saudi Arabia to Singapore, based on a formula by R S Platou, an Oslo-based shipbroker, and Bloomberg bunker prices. Frontline Ltd, the world's biggest VLCC operator, said on May 30 that it needs US$29,500 to break even on each of the vessels. West Texas Intermediate, the benchmark US crude, recently moved into a price structure known as backwardation in which oil futures closest to expiration are more expensive than contracts for delivery in later months. That encourages refineries to burn off existing stockpiles before they book tankers to collect fresh supplies from the Middle East and West Africa. Bookings of supertankers sailing from the Middle East to Asia account for 47 per cent of global demand for the carriers, according to New York-based McQuilling Brokerage Partners. US and Caribbean cargoes account for 14 per cent and are the world's second-busiest market for supertankers. -- Bloomberg