Mideast crude tanker rates soar to near 6 week-high
Crude oil tanker earnings on the major Middle East route were at their highest in nearly six weeks on Monday, bolstered by growing concerns over energy supply disruptions due to Western sanctions on Iran, Reuters reports. The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP reached W70.53 in the worldscale measure of freight rates, or $41,093 a day when translated into average earnings, from W70.28 or $39,864 on Friday and W59.00 or $23,081 last Monday. Rates were at their highest since Feb. 21.
"We are proceeding through a unique spring/summer in which Iranian output is at risk of coming off line, threatening logistical patterns and disrupting supply," said Omar Nokta, managing director with Dahlman Rose & Co. "We expect this will keep spot rates elevated during a period in which overall fundamentals remain generally weak."
Brokers said a rush of fixings earlier this month from Saudi Arabia to the United States, together with buoyant Asian demand, had bolstered sentiment as buyers sought to ensure stable supplies.
"We are currently witnessing the highest earnings for the VLCC sector since the crisis in Libya last year," broker E.A. Gibson said. "There is every chance that this recovery could be sustained, or go even higher if the uncertainty surrounding Iran remains."
Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees. VLCC operating costs, including financial costs, are estimated at around $10,000 a day.
Average VLCC earnings have been volatile in recent months, falling below the $10,000 a day level a number of times. They have stayed above $10,000 a day since Feb. 15.
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W40.43 from W40.39 on Friday and W36.68 last Monday.
Tanker players said the outlook still remained challenging, with downside risks for the sector given worries about the global economy and the fact that more tankers, ordered when times were good, are still to hit the global fleet.
"We believe geopolitical events including Iranian sanctions could be leading to Chinese and Asian stockpiling of crude ahead of tighter sanctions this summer," said Deutsche Bank analyst Justin Yagerman.
"By the end of June, it will become even harder to insure tankers carrying Iranian crude, and Iran's own fleet is having difficulty trading as well. After what we believe is some near-term Asian stockpiling, we expect to see downside to the fixture count and a growing forward tonnage supply list, pressuring rates lower."
High bunker fuel costs were also eating into earnings.
"We see downside to spot earnings for VLCCs and suezmaxes in the coming months, especially as we hit seasonally weak summer months," Yagerman said.
"We still expect fleet growth to outpace demand growth in 2012 with the potential for a trough in 2013. Given our tepid outlook, we remain neutral on our tanker universe."
Cross-Mediterranean aframax tanker rates were at W91.91 on Monday, compared with W91.32 on Friday and W97.82 last Monday.
Rates for suezmax tankers on the Black Sea to Med route reached W80.67 or $14,794 a day from W81.46 or $15,198 a day on Friday and W91.04 or $23,839 a day last Monday.
"A quieter week coupled with plentiful tonnage saw Black Sea - MED rates fall," broker SSY said.
"We are proceeding through a unique spring/summer in which Iranian output is at risk of coming off line, threatening logistical patterns and disrupting supply," said Omar Nokta, managing director with Dahlman Rose & Co. "We expect this will keep spot rates elevated during a period in which overall fundamentals remain generally weak."
Brokers said a rush of fixings earlier this month from Saudi Arabia to the United States, together with buoyant Asian demand, had bolstered sentiment as buyers sought to ensure stable supplies.
"We are currently witnessing the highest earnings for the VLCC sector since the crisis in Libya last year," broker E.A. Gibson said. "There is every chance that this recovery could be sustained, or go even higher if the uncertainty surrounding Iran remains."
Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees. VLCC operating costs, including financial costs, are estimated at around $10,000 a day.
Average VLCC earnings have been volatile in recent months, falling below the $10,000 a day level a number of times. They have stayed above $10,000 a day since Feb. 15.
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W40.43 from W40.39 on Friday and W36.68 last Monday.
Tanker players said the outlook still remained challenging, with downside risks for the sector given worries about the global economy and the fact that more tankers, ordered when times were good, are still to hit the global fleet.
"We believe geopolitical events including Iranian sanctions could be leading to Chinese and Asian stockpiling of crude ahead of tighter sanctions this summer," said Deutsche Bank analyst Justin Yagerman.
"By the end of June, it will become even harder to insure tankers carrying Iranian crude, and Iran's own fleet is having difficulty trading as well. After what we believe is some near-term Asian stockpiling, we expect to see downside to the fixture count and a growing forward tonnage supply list, pressuring rates lower."
High bunker fuel costs were also eating into earnings.
"We see downside to spot earnings for VLCCs and suezmaxes in the coming months, especially as we hit seasonally weak summer months," Yagerman said.
"We still expect fleet growth to outpace demand growth in 2012 with the potential for a trough in 2013. Given our tepid outlook, we remain neutral on our tanker universe."
Cross-Mediterranean aframax tanker rates were at W91.91 on Monday, compared with W91.32 on Friday and W97.82 last Monday.
Rates for suezmax tankers on the Black Sea to Med route reached W80.67 or $14,794 a day from W81.46 or $15,198 a day on Friday and W91.04 or $23,839 a day last Monday.
"A quieter week coupled with plentiful tonnage saw Black Sea - MED rates fall," broker SSY said.