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Mideast crude tanker rates, Hormuz watched
July 2, 2012 / 5:11 PM / 5 years ago

Mideast crude tanker rates, Hormuz watched

* Crude tanker outlook seen challenging

* Iran has threatened to block vital Strait

By Jonathan Saul

LONDON, July 2 (Reuters) - Crude oil tanker earnings on the major Middle East route were weaker on Monday as a surplus of available vessels took its toll on rate sentiment.

Tanker market players said Iran continued to be watched, especially after the European Union ban on Iranian oil imports came into effect on Sunday.

The world’s benchmark VLCC export route from the Middle East Gulf (MEG) to Japan DFRT-ME-JAP reached W38.86 in the worldscale measure of freight rates, or $6,114 a day when translated into average earnings, from W40.35 or $7,895 on Friday and W41.89 or $11,362 last Monday.

“The MEG VLCC market was quiet last week, on the surface at least, as plentiful tonnage availability ensured that charterers were in no real hurry to weigh in,” broker SSY said on Monday.

“Ample tonnage supply for the current fixing window, however, suggests that charterers should feel reasonably comfortable.”

Last month, average daily earnings fell to their lowest in seven months 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.

In April 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 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. Earnings had stayed above $10,000 a day from Feb. 15. until June 8 and have barely moved above that level in the past three weeks.

VLCC rates from the Gulf to the United States DFRT-ME-USG were at W27.86 from W27.90 on Friday and W30.36 last Monday.

IRAN STAYS IN FOCUS

Iran’s National Security and Foreign Policy Committee has drafted a bill calling for Iran to try to stop oil tankers from shipping crude through the Strait of Hormuz to countries that support sanctions against it, a committee member said on Monday.

Iranian threats to block the waterway through which about 17 million barrels a day sailed in 2011 have grown in the past year as U.S. and European sanctions aimed at starving Tehran of funds for its nuclear programme have tightened.

”While we expect tanker rates to face downward pressure as Iranian exports are taken off of the market, we believe that logistical disruptions, in addition to uncertainty regarding supply and insurance should keep rates at elevated levels, Dahlman Rose & Co managing director Omar Nokta said in a report.

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 financial crisis in Europe and weaker world economic prospects have provided no reason for improved optimism,” broker E.A. Gibson said.

“Over the past 6 months there have been a few bright spots for the tanker market and the summer months may be a difficult period for owners to weather, as a major recovery continues to elude the market.”

Rates for suezmax tankers on the Black Sea to Med route reached W72.71 or $16,133 a day from W70.92 or $14,917 a day on Friday and W70.17 or $14,829 a day last Monday.

Cross-Mediterranean aframax tanker rates were at W120.68 or $29,994 day on Monday, compared with W119.77 or $29,664 a day on Friday and W97.05 or $17,116 a day last Monday. (Editing by William Hardy)

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