Middle East Tanker Surplus Rises to Seven-Month High.
The supply of supertankers competing to haul cargoes of Middle East crude oil jumped to a seven-month high as U.S. and Asian holidays and an industry event in London cut demand. The surplus of very large crude carriers, or VLCCs, seeking cargoes over the next 30 days rose to 40 percent, according to the median estimate of five brokers and one owner surveyed by Bloomberg News today. That"s up from 28 percent a week ago to the highest since July 20.
Markets in China, Taiwan, Hong Kong, Singapore and Malaysia are closed today for the Lunar New Year holiday, and U.S. markets are shut for Presidents Day. In addition, many oil traders are in London to attend International Petroleum Week, which also tends to cut demand for vessels.
?Holidays in the U.S., China and much of Asia are exacerbating the demand weakness we saw for the past couple of weeks,? said Halvor Ellefsen, a tanker broker at SeaLeague A/S in Oslo. ?The tonnage won"t clear until we have a clear and sustained pickup in demand, and that"s not going to happen today.?
$27,222 a Day
Rental income from shipping Saudi Arabian crude to Japan, the industry"s benchmark supertanker route, today rose 1.7 percent to $27,222 a day after a two-week, 67 percent plunge, according to the London-based Baltic Exchange. That"s less than the $32,900 that Frontline Ltd., the biggest operator of the vessels, said in November it needs to break even on them.
Last week the surplus increased more than threefold, the most since Bloomberg began collating the data in March 2009. As of July 20 of last year, the surplus was 40 percent.
Of the six respondents, three said vessel supply increased relative to demand, compared with their previous estimates. Three said it stayed the same.
Owners are unlikely to see immediate relief from the market in West Africa, the second-largest loading region for supertankers after the Persian Gulf.
Rental income for shipments to the U.S. from West Africa is $3,811 a day higher than Persian Gulf deliveries to Asia, according to data from U.S.-based Poten & Partners.
Fuel worth about $1 million would be needed to sail an empty VLCC between the two cargo-loading regions, according to ship-fuel prices compiled by Bloomberg and data from Riverlake Shipping SA and the world-register.net Web site.
Ship fuel costs about $449.78 a metric ton, according to data compiled by Bloomberg from 25 ports around the world. A VLCC uses about 90 tons of fuel a day when sailing empty, according to estimates from Geneva-based Riverlake, Switzerland"s biggest shipbroker.
The voyage between West Africa and the Persian Gulf lasts about 25 days, according to data from world-register.net.
On average, available VLCCs have outnumbered cargoes in the Persian Gulf by 19 percent since March last year, when Bloomberg News began weekly supply-and-demand surveys.
Rental income from suezmax tankers that haul 1 million- barrel cargoes, half as much as a VLCC, shed 0.9 percent to $14,697 a day today. Aframaxes that carry 650,000 barrels fell 2.5 percent to $12,541 daily.