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Thu 29 Jul 2010 12:20 AM

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Arabian Gulf tanker rates decline on excess supply

Baltic Exchange said that charter rates for VLCC's slid 3.2% to 54.77 Worldscale points.

Arabian Gulf tanker rates decline on excess supply
COST FALL: The cost of delivering Middle East crude oil to Asia fell for the first day in three. (Getty Images)

The cost of delivering Middle East crude oil to Asia, the world’s busiest route for supertankers, fell for the first day in three in London on a surplus of carriers seeking cargoes.

Charter rates for very large crude carriers, or VLCCs, hauling oil on the industry’s benchmark route between Saudi Arabia and Japan slid 3.2 percent to 54.77 Worldscale points, according to the London based Baltic Exchange. Returns from the voyage slumped 13 percent to $15,247 a day.

In an emailed report on Wednesday, Fearnley Consultants, Oslo, said: “The market does not look too promising for owners."

About 85 ships are seeking cargoes within the next 30 days, while about 40 August bookings have been concluded. About 100 to 110 spot charters usually take place every month, according to data from Paris based broker Barry Rogliano Salles.

VLCCs cost $11,601 a day to operate including crew, insurance and repairs, according to Drewry Shipping Consultants in London.

Frontline, the biggest supertanker operator, needs $31,100 daily to break even on the carriers once finance costs are included.

There are 16 percent more VLCCS than cargoes, according to a Bloomberg News survey of owners and brokers yesterday. The excess was 23 percent on July 22.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes.

Flat rates for every voyage, 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.

Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.

The Baltic Dirty Tanker Index, a wider measure of crude oil transportation costs, fell for a third day, sliding 2.5 percent to 823 points, according to the exchange. The drop was the biggest since June 1.

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