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Low rates continues to prevail

Low rates continues to prevail
Things are still not looking up in the VLCC spot markets as activity seems to be dipping even further.

Things are still not looking up in the VLCC spot markets as activity seems to be dipping even further.

Things are still not looking up in the VLCC spot markets as activity seems to be dipping even further.

?The enduring trend of low returns in the VLCC market continued [...] and gloom is the prevailing emotion in the owner's camp,? Fearnleys told in a note on Wednesday.

The record low rates of last week continued to prevail this week as tonnage availability outstrips cargo requirements.

According to Fearnleys, the total number of cargoes lifted in the MEG declined by 20% in March compared with January.

?This, combined with virtually no scrapping and a steady flow of newbuildings entering the market, indicates that the end to owners' misery is probably not close at hand,? it said.

MEG-East voyages are being fixed around WS 35 at present while the benchmark MEG-UKC route for MEG-West voyages sunk to a new low of WS 22.5.

The rate of WS 35 for MEG-East voyages is at a seven-year low.

According to Bassøe ?VLCC activity in West Africa is also suffering? as rates softened from WS 50 to around WS 47.

?There is no bottom in sight for VLCC spot rates currently and many owners are not breaking even,? a Singapore-based broker told.

?OPEC is supposedly trying its best to cut 4.2 million barrels per day (bpd) from the market. Full compliance is equivalent to at least two VLCCs out of a job every day."

Owners' earnings now stand at around $27,000 per day per vessel for benchmark MEG-Korea voyages while the MEG-UKC route is fetching only $12,000 per day per vessel.

Brokers tell that average cash break-even earnings for the VLCC spot market is below $25,000 per day per vessel, but break-even rates are calculated differently across the industry, with some companies like Frontline Ltd. reporting its break-even rate as high as $34,700 per VLCC.

Meanwhile, the latest report from the Energy Information Administration (EIA) of the US Department of Energy has revised its global oil demand forecast downwards again.

The EIA"s projection for 2009 global oil consumption is now 3 million bpd lower than it was in its September 2008 Outlook.

Aside from revising its demand forecast downwards, the EIA is also now more cautious about its estimates for recovery.

www.TurkishMaritime.com.tr

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