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Wed 19 Jan 2011 01:00 AM

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Supertanker surplus shrinks as owners await cargoes

Owners await increased demand to load next month as surplus of supertankers shrinks

Supertanker surplus shrinks as owners await cargoes
Rental income from the industry’s benchmark Saudi Arabia-to-Japan route advanced 5.8 percent on Tuesday

A surplus of supertankers competing for 2 million-barrel cargoes of Middle East crude oil shrank as owners awaited increased demand for vessels to load next month.

There are 15 percent more very large crude carriers, or VLCCs, for hire over the next 30 days than there are likely cargoes, according to the median estimate of eight shipbrokers and owners surveyed by Bloomberg News on Tuesday. A week ago, the excess came to 18 percent.

“Cargo volume for next-month loading will come into play this week as charterers try to take advantage of the low voyage cost,” DnB NOR Markets analysts Henrik With and Glenn Lodden wrote in an emailed report on Tuesday. Demand for ships “could consequently rise”, they said.

Rental income from the industry’s benchmark Saudi Arabia-to-Japan route advanced 5.8 percent on Tuesday to $8,985 a day, according to the Baltic Exchange in London. That’s less than the $31,300 that Frontline Ltd, the world’s biggest operator, needs to break even on the ships and below the $12,777 that Drewry Shipping Consultants Ltd estimates the vessels need to pay crew, repairs and other running costs.

Frontline rejected cargoes last year and has cut speeds when freight rates were previously unprofitable.

Rates on the route rose 1 percent to 46.31 Worldscale 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 metric ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

Daily returns from suezmax tankers that haul 1 million barrel cargoes, half as much as VLCCs, fell 0.9 percent to $4,233, according to the exchange. Returns from aframaxes that carry 650,000 barrels retreated 6 percent to $3,178 a day, the lowest price since November 8.

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