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Tue 21 Dec 2010 11:40 PM

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Middle East tanker excess drops as demand accelerates

Demand to charter ships jumped to the highest since July and returns from leasing ships surged

Middle East tanker excess drops as demand accelerates
There are 10 percent more very large crude carriers for hire over the next 30 days than there are cargoes (Getty Images)

An excess of supertankers competing for Arabian Gulf crude oil shrank for a second week as demand to charter ships jumped to the highest since July and returns from leasing ships surged.

There are 10 percent more very large crude carriers, or VLCCs, for hire over the next 30 days than there are cargoes, according to the median estimate of seven shipbrokers and owners surveyed by Bloomberg News on Tuesday. A week ago the excess stood at 19 percent.

Oil companies so far hired 112 VLCCs for loading this month, according to data from Imarex Asia, a unit of Oslo based freight-derivatives broker Imarex. That’s the largest monthly tally since July, when there were 115 bookings, according to the broker’s data.

Rental income from the industry’s benchmark Saudi Arabia-to-Japan route jumped 41 percent to $23,221 a day on Tuesday, according to data from the Baltic Exchange in London.

Weather related delays may be mounting at Chinese ports, Per Mansson, managing director at shipbroker Nor Ocean Stockholm, said by e-mail on Monday. It takes about three weeks to get back to the Arabian Gulf from Shanghai.

Rental income has advanced more than threefold over the past four sessions, according to the Baltic Exchange. Charter rates as measured in industry standard Worldscale terms climbed 10 percent to 66.5 points on Tuesday, their largest one day gain since November 2, according to the bourse.

Still, returns from shipping Middle East oil to Asia, the biggest trade route for VLCCs, remain on course for the worst December since at least 2001.

Rental income so far this month averaged $16,141 a day, according to data compiled by Bloomberg stretching back to that year. The previous low for a December was in 2001, when they averaged $19,341 a day.

It would also constitute the worst December according to data compiled by the Baltic Exchange that date back to 2008.

The Baltic Dirty Tanker Index, a wider measure of crude oil transportation costs, climbed 0.5 percent to 1,079 points, according to the bourse’s data, the highest level since May 24.

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