July 16, 2012 / 5:03 PM / 5 years ago

Mideast crude tanker rates fall to 9-month low

* VLCC rates seen staying pressured

* Suezmax market seeing firmer returns

By Jonathan Saul

LONDON, July 16 (Reuters) - Crude oil tanker earnings on the major Middle East route slid to their lowest levels in nine months on Monday as a glut of vessels and slowing demand battered rates.

The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP reached W33.88 in the worldscale measure of freight rates, or -$3,899 a day when translated into average earnings, from W33.73 or -$3,609 on Friday and W35.75 or -$1,555 last Monday.

Average earnings were at their lowest since Oct. 17 last year.

"Physical VLCC rates continue to languish at low levels," Marex Spectron said.

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.

"There remained little cheer for owners in the MEG VLCC market last week as tonnage continued to overwhelm meagre cargo volumes," broker SSY said on Monday.

"The final fixture count for July looks likely to be significantly lower than in recent months, explaining the surfeit of tonnage in the region and current depressed fixing levels."

Average earnings turned negative on July 5, for the first time since Nov. 3 last year.

Last year on Aug. 1, VLCC average earnings turned negative for the first time since the Baltic Exchange started collating the data in 2008 as worsening conditions took their toll.

In April of 2012 earnings reached their highest in a year at about $45,000 a day, 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 disruption 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. Earnings stayed above $10,000 a day from Feb. 15. until June 8 and then again between June 20 and June 27 before sliding below the key psychological level since then.

VLCC rates from the Gulf to the United States DFRT-ME-USG were at W24.04 from W24.13 on Friday and W25.04 last Monday.

Tanker players said downside risks remained 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.

"The tanker market ... lacks a catalyst to move rates up or down, leaving us with stagnation and negative demandside news from both east and west of Suez," HSBC said.

Rates for suezmax tankers on the Black Sea to Med route reached W73.13 or $15,657 a day, from W72.04 or $15,094 a day on Friday and W71.25 or $13,967 a day last Monday.

"Decent Atlantic and Mediterranean volumes have helped suezmaxes outperform the rest of the tanker market in recent weeks," Deutsche Bank said.

Cross-Mediterranean aframax tanker rates were at W89.77 or $11,659 day on Monday, compared with W90.00 or $12,134 a day on Friday and W100.00 or $17,291 a day last Monday. (Editing by James Jukwey)

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