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Wed 28 Jul 2010 02:24 AM

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Middle East super tanker surplus drops a second week

16% more VLCCs are competing for business over the next month than there are cargoes.

Middle East super tanker surplus drops a second week
TANKER SURPLUS: A surplus of supertankers competing for Middle East oil shrank for the second week as owners cut ship speeds and cargo flow. (Getty Images)

A surplus of supertankers competing to haul Middle East oil shrank for a second week as owners cut ship speeds and the flow of cargoes from the world’s biggest crude loading region accelerated.

There are 16 percent more very large crude carriers, or VLCCs, competing for business over the next 30 days than there are cargoes, according to the median estimate of six owners and brokers surveyed by Bloomberg News today. The excess was 23 percent on July 22.

Frontline Ltd, the world’s largest operator of supertankers, said July 23 that owners were reducing speeds and rejecting cargoes to counteract increased fuel prices and slumping returns.

When ships travel at lower speeds, fewer vessels are available to collect consignments.

The supply of ships for August’s first 10 days was diminished by “busy activity,” Imarex ASA, an Oslo based freight derivatives broker, said in an emailed report today. More vessels became available for loading in the second 10 days of the month, Imarex said.

Rental income from shipping Saudi Arabian crude to Japan, the industry’s benchmark route, climbed 5.3 percent to $17,453 a day today, after slumping 23 percent last week, according to the London based Baltic Exchange. In industry standard Worldscale terms, rates advanced 1.2 percent to 56.56 points.

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.

Frontline said May 21 it needs $31,100 a day to break even on its VLCCs.

The Baltic Dirty Tanker Index, a wider measure of crude oil transportation costs, fell 1.7 percent to 844 points today, according to the exchange.

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