Rates for supertankers, vessels carrying almost half the world’s oil, extended their two-month slump to 44 percent as an expanding fleet competed to ship less supply from the Organization of Petroleum Exporting Countries. Rates for the vessels, bigger than the Chrysler Building, fell 0.8 percent to 30.53 Worldscale points yesterday on the benchmark Saudi Arabia to Japan route, Baltic Exchange data show. They reached 54.66 points on June 24. Worldscale points are a percentage of a flat rate for more than 320,000 routes.
Owners are now paying to carry Middle East cargoes on their supertankers, designed to hold 2 million barrels of crude. Rates retreated as OPEC constricted supply to shore up oil prices that fell a record 54 percent last year. That coincided with a fleet expansion as ships ordered several years ago, when rates were as much as 10 times higher, left yards.
“Most people out there are struggling quite hard,” Anders Karlsen, an Oslo-based shipping analyst at Nordea Markets, said by phone. “The rates they make now are basically losing money every day and there doesn’t seem to be much hope either in the short term.”
Frontline Ltd., the world’s biggest supertanker operator, posted a 91 percent plunge in second-quarter profit on Aug. 28, joining rivals including Overseas Shipholding Group Inc., the biggest U.S.-based owner, and Antwerp-based Euronav NV in reporting lower earnings.
The five-member Bloomberg Tanker Index, led by Hamilton, Bermuda-based Frontline, fell 21 percent this year, extending last year’s record 49 percent plunge.
OPEC Supplies
OPEC, supplier of about 40 percent of the world’s oil, cut output by 4 percent to 28.4 million barrels a day this year, according to data compiled by Bloomberg. The number of in- service supertankers advanced 5.6 percent to 527 ships this year, according to Lloyd’s Register-Fairplay data on Bloomberg.
Returns for owners on eastern and western routes from the Middle East reached this year’s peak of $64,146 a day in January, and stood at a negative $1,282 a day today.
The vessels need $11,603 a day to pay insurance, crew, repairs and other running costs, according to London-based Drewry Shipping Consultants Ltd. That suggests losses of about $12,900 a day for delivering cargoes, including the negative charter rates. Frontline says its break even is $31,900 a day once finance costs are taken into account.
Aging Carriers
The slump is triggering an acceleration in the demolition of aging carriers, according to Cumberland, Maryland-based Global Marketing Systems Inc., the world’s largest cash buyer of obsolete vessels. The number of supertankers sold for scrap may reach a six-year high, the company estimates.
“Suddenly, in the last two weeks, interest has come up,” Anil Sharma, chief executive officer of GMS, said by phone yesterday. “Owners are starting to look at recycling options.”
Vessel demand may also improve as oil consumption stops contracting in the U.S. and Europe, Oslo-based shipbroker Lorentzen & Stemoco A/S said in a report today.
“We are confident that tanker demand is close to bottoming out for now,” Erik Folkeson Jensen, an analyst at the broker, wrote. “Oil consumption in North America and Europe has stopped falling while the Chinese appetite for oil is growing day by day. Oil inventories have finally started to draw.”
Worldscale points for every voyage, quoted in U.S. 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.
Owners are now paying to carry Middle East cargoes on their supertankers, designed to hold 2 million barrels of crude. Rates retreated as OPEC constricted supply to shore up oil prices that fell a record 54 percent last year. That coincided with a fleet expansion as ships ordered several years ago, when rates were as much as 10 times higher, left yards.
“Most people out there are struggling quite hard,” Anders Karlsen, an Oslo-based shipping analyst at Nordea Markets, said by phone. “The rates they make now are basically losing money every day and there doesn’t seem to be much hope either in the short term.”
Frontline Ltd., the world’s biggest supertanker operator, posted a 91 percent plunge in second-quarter profit on Aug. 28, joining rivals including Overseas Shipholding Group Inc., the biggest U.S.-based owner, and Antwerp-based Euronav NV in reporting lower earnings.
The five-member Bloomberg Tanker Index, led by Hamilton, Bermuda-based Frontline, fell 21 percent this year, extending last year’s record 49 percent plunge.
OPEC Supplies
OPEC, supplier of about 40 percent of the world’s oil, cut output by 4 percent to 28.4 million barrels a day this year, according to data compiled by Bloomberg. The number of in- service supertankers advanced 5.6 percent to 527 ships this year, according to Lloyd’s Register-Fairplay data on Bloomberg.
Returns for owners on eastern and western routes from the Middle East reached this year’s peak of $64,146 a day in January, and stood at a negative $1,282 a day today.
The vessels need $11,603 a day to pay insurance, crew, repairs and other running costs, according to London-based Drewry Shipping Consultants Ltd. That suggests losses of about $12,900 a day for delivering cargoes, including the negative charter rates. Frontline says its break even is $31,900 a day once finance costs are taken into account.
Aging Carriers
The slump is triggering an acceleration in the demolition of aging carriers, according to Cumberland, Maryland-based Global Marketing Systems Inc., the world’s largest cash buyer of obsolete vessels. The number of supertankers sold for scrap may reach a six-year high, the company estimates.
“Suddenly, in the last two weeks, interest has come up,” Anil Sharma, chief executive officer of GMS, said by phone yesterday. “Owners are starting to look at recycling options.”
Vessel demand may also improve as oil consumption stops contracting in the U.S. and Europe, Oslo-based shipbroker Lorentzen & Stemoco A/S said in a report today.
“We are confident that tanker demand is close to bottoming out for now,” Erik Folkeson Jensen, an analyst at the broker, wrote. “Oil consumption in North America and Europe has stopped falling while the Chinese appetite for oil is growing day by day. Oil inventories have finally started to draw.”
Worldscale points for every voyage, quoted in U.S. 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.