A surplus of supertankers competing to collect 2 million barrel cargoes of Middle East crude oil expanded, curbing the potential for rates to rally as Northern Hemisphere refineries seek more crude to meet winter demand.
There are 23 percent more very large crude carriers, or VLCCs, for hire over the next four weeks than there are cargoes, according to the median estimate of six shipowners and brokers surveyed by Bloomberg News. The surplus was 18 percent for the past two weeks.
“On paper, it does not look grand right now” because of the vessel surplus, said Halvor Ellefsen, a shipbroker at SeaLeague A/S in Oslo. While the market “may tick up a bit” between now and the end of the first quarter of 2011, “I would not call it a spike,” he said.
Rental income from the industry’s benchmark trade route for Saudi Arabian shipments to Japan advanced 29 percent to $15,364 a day over the past three sessions, according to data from the London based Baltic Exchange. That’s still below the $31,300 that Frontline Ltd, the largest operator of the ships, said November 24 it needs to break even on them once finance repayments are taken into account.
Freight derivatives contracts called forward freight agreements, or FFAs, show rental income from the Saudi Arabia to Japan route will average $26,595 a day in the first quarter of 2011, according to prices from Imarex ASA, an Oslo based broker of the accords.
“Rates won’t be ramping up anytime soon” unless fuel costs accelerate, forcing owners to increase what they charge, Imarex Asia, a Singapore based unit of Imarex, said by email today.
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