Mideast crude tanker rates soft, outlook seen bearish
Crude oil tanker earnings on the major Middle East route stayed soft as a glut of vessels and a slowdown in the pace of shipments took their toll on sentiment, Reuters reports.
The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP reached 41.41 in the worldscale measure of freight rates, or $6,773 a day when translated into average earnings, from W41.00 or $7,200 on Friday and W41.41 or $8,534 last Monday.
"The combination of adequate tonnage and low activity is the main explanation for the bleak fundamentals we are observing at the moment," Pareto Securities said.
Average daily earnings fell to their lowest in seven months last week at $5,923.
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.
"The surfeit of tonnage saw in excess of 20 vessels that had been open for June dates carried over into July, ensuring that the short-term outlook for owners remained bearish," broker SSY said.
In April earnings reached their highest in a year at the $45,000 a day level, fuelled by a cargo rally, which subsequently ran out of steam.
A rush of fixings earlier in April from Saudi Arabia to the United States, together with buoyant Asian demand, bolstered sentiment as buyers sought to ensure stable supplies, given growing fears of disruptions due to the tensions with major oil producer Iran.
Average VLCC earnings have been volatile in recent months, falling below the $10,000 a day level a number of times. Until last Monday, earnings had stayed above $10,000 a day since Feb. 15.
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W30.32 from W30.18 on Friday and W31.61 last Monday.
Tanker players said the outlook remained pressured, with downside risks for the sector given worries about the global economy and the fact that more tankers, ordered when times were good, were still to join the global fleet.
Rates for suezmax tankers on the Black Sea to Med route reached W73.75 or $15,510 a day from W74.79 or $16,989 a day on Friday and W72.00 or $14,958 a day last Monday.
"Rates are expected to remain steady," broker CR Weber said, citing lighter availability of suezmax vessels.
Cross-Mediterranean aframax tanker rates were at W105.41 or $19,823 day on Monday, compared with W108.86 or $22,321 a day on Friday and W91.14 or $12,517 a day last Monday.