Mideast crude tanker rates steady, supply weighing

Crude oil tanker earnings on the major Middle East route were steady on Monday although a glut of available vessels continued to hurt profitability with some analysts expecting the rout to extend to 2013.

The world's benchmark VLCC export TD3 route from the Middle East Gulf (MEG) to Japan reached W41.46 in the worldscale measure of freight rates, or -$5,977 a day when translated into average earnings, from W41.44 or -$6,492 day on Friday and W44.96 or -$1,826 a day last Monday.

"The VLCC market MEG-East continues to operate with meager returns and the ample position list of available tonnage has been helping the charterers' cause," said broker P.F. Bassoe.

Rates turned negative on August 1 for the first time since the Baltic Exchange started collating earnings equivalent data in 2008. They have been in positive territory for only six sessions since then and have stayed negative since Aug. 26.

"Newbuild deliveries will continue to weigh on the market in 2012. But in 2013 fleet growth could come down to 3 to 4 per cent, even after taking into consideration declining scrapping when owners see signs of recovery," RS Platou Markets said in a report on Monday.

VLCC operating costs including fixed costs are estimated at around the $10,000 a day level. Average earnings are calculated less voyage costs such as bunker fuel and port fees.

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.

"Tonnage oversupply has confounded typical seasonal and systemic weakness and has the market resounding with bearish grumbles," said brokerage Poten & Partners.

"Current rate levels have owners in limbo; earnings are such that companies are effectively paying charterers for the privilege of employment."

Demand for oil has not been strong enough to absorb the glut of oil tankers currently on the market, leading to depressed rates and earnings for shipping firms such as Frontline.

VLCC rates from the Gulf to the United States were at W32.50 from W32.82 on Friday and W34.04 last Monday.

VLCC rates from West Africa to the US Gulf were at W47.46 from W47.43 on Friday and W47.50 last Monday.

Rates for suezmax tankers on the Black Sea to Med route reached W86.15 from W85.17 on Friday and W85.62 last Monday. Last month average earnings rose to their highest since the end of April.

"Despite a busy start to the week in West Africa, Suezmaxes in Mediterranean and Black Sea failed to find a spark and have ended certainly no better than when this week started," broker EA Gibson said on Friday.

"Black Sea stems have changed hands and several vessels have been failed on subjects."