Mideast crude tanker rates fall on poor business

Crude oil tanker earnings on the major Middle East route slipped on Monday as cargo fixing momentum faded and the market once again struggled with growing vessel availability.

The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W49.03 in the worldscale measure of freight rates, or -$769 a day when translated into average earnings, from W51.18 or $2,823 day on Friday and W52.24 or $4,866 a day last Monday. Rates had turned positive on October 20 for the first time since August 25.

"A four point drop, to W52, on Friday, however, served as a stark reminder that overall tonnage supply fundamentals remain heavily weighted in charterers' favour," broker SSY said on Monday.

"Nevertheless, with much of the second (part of November) ... still to be fixed, owners may have another chance to seize the initiative this week."

Average VLCC earnings turned negative on August 1 for the first time since the Baltic Exchange started collating the data in 2008. They have been in positive territory for only 14 out of a total of 65 sessions since then.

"Tanker newbuildings ordered prior to the global economic downturn continue to deliver into the market, resulting in an oversupply of vessels and consistently low freight rates," brokerage Poten & Partners said in a report.

"Rising costs are further complicating matters for tanker operators. In general, industry participants are bracing themselves for more hard times ahead."

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 the $10,000 a day.

Brokers said tanker owners were also struggling with rising bunker fuel costs, which were eating into earnings.

VLCC rates from the Gulf to the United States were at W34.07 from W34.39 on Friday and W34.04 last Monday.

Rates for suezmax tankers on the Black Sea to Med route reached W97.50 or $20,884 a day from W101.92 or $24,294 a day on Friday and W138.85 or $52,815 a day last Monday. Earlier this month hit their highest levels since March.

"As we expected, the brief spike in suezmax earnings started to come to an end last week as oversupply in West Africa undercut earnings," Cantor Fitzgerald said on Monday.

"However, there still remain some delays in the Turkish Straits, which could continue to provide some support for rates."