The cost of delivering Middle East crude oil to Asia, the world"s busiest route for supertankers, may advance as ship owners spurn unprofitable rents.
The cost of delivering Middle East crude oil to Asia, the world"s busiest route for supertankers, may advance as ship owners spurn unprofitable rents. The London-based Baltic Exchange"s benchmark rate for Saudi Arabian oil shipments to Japan gained 0.9 percent yesterday to 36.05 Worldscale points. The measure fell to its lowest since September 2002 on March 24. A rate of 36.05 equals $25,305 a day and compares with the $32,100 Frontline Ltd., the biggest supertanker owner, needs to break even.
?I am not seeing any fundamental support, just the owners doing the utmost they can to at least keep the market at above 30 Worldscale levels,? Nikos Varvaropoulos, an Athens-based official at Optima Shipbrokers, said. They ?cannot do anything? but reject cargoes, he said.
Tanker rates have fallen as the world recession cuts demand for oil. The Organization of Petroleum Exporting Countries has agreed to production cuts of 4.2 million barrels a day since September after prices for the fuel tumbled from record highs. OPEC and the International Energy Agency cut forecasts for 2009 oil demand on March 13. OPEC produces about 40 percent of global oil supplies.
Oil rose today on signs a slump in fuel demand in the U.S., the world"s biggest energy consumer, may be ending. Fuel consumption in the country rose 2.2 percent last week and gasoline demand gained 1.6 percent, according to the Energy Department. Crude advanced 2.1 percent to $53.87 a barrel as of 8:02 a.m. in New York.
Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
Each flat rate assessment gives owners and oil companies a starting point for negotiating hire rates without having to calculate the value of each deal from scratch.
Frontline"s breakeven is the rate covering running costs for each ship, interest and scheduled loan repayments and corporate overheads. It doesn"t need to earn $32,100 from vessels hauling single-voyage cargoes to be profitable because it also has ships leased on longer-term, fixed-rate rents and better returns, Inger Klemp, chief financial officer of the company"s management unit, said March 11.