Middle East Tanker Rents to Increase

Rental income from supertankers shipping Middle East crude oil to Asia more than doubled after demand strengthened and owners rejected unprofitable cargoes. Returns from very large crude carriers, or VLCCs, on the Saudi Arabia to Japan route climbed 114% to US$14,986 a day, according to data from the London based Baltic Exchange today. It was the largest one day advance since 18 September 2010.

Per Mansson, managing director of shipbroker Nor Ocean Stockholm AB, said by email that today’s jump “is a reaction to some heavy fixing in the last couple of days.” He added that there is a “thinning” in the supply of ships that can load around 20 August 2010.

Frontline Ltd, the world’s largest VLCC operator, had on August 4 said that it would anchor vessels and refuse shipments until profits from hauling oil improve. Maersk Tankers, a unit of AP Moeller-Maersk, said two days later it was considering the same strategy. In non oil commodity shipping markets, rents for iron ore carrying capesize ships advanced 20% today as demand for the steelmaking ingredient accelerated.

In an email report today, Oslo based Fearnley Consultants said: “The VLCC market may have bottomed out.” According to them, “Charterers are willing to pay up” for shipments from the Persian Gulf to Asia. The International Energy Agency raised its estimate for worldwide oil consumption in 2010 and 2011 on “slightly higher” global economic growth forecasts by the International Monetary Fund in 2010. Charter rates for VLCCs on the Saudi Arabia to Japan voyage climbed 15% to 55.09 Worldscale points, according to Baltic Exchange pricing. In an email, Simon Chattrabhuti, head of tanker research at ICAP Shipping International Ltd. attributed today’s increase in freight rates to: “End month cargoes being fixed, a thinner tonnage list, and firmer sentiment among owners”. - Arabian Business