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Rates may halt as demand wanes

Rates may halt as demand wanes
The cost of shipping Middle East crude oil to Asia may halt its best start to a year since at least 1999 as vessel demand falters because of record production cuts by OPEC.

The cost of shipping Middle East crude oil to Asia may halt its best start to a year since at least 1999 as vessel demand falters because of record production cuts by OPEC.

The cost of shipping Middle East crude oil to Asia may halt its best start to a year since at least 1999 as vessel demand falters because of record production cuts by the Organization of Petroleum Exporting Countries. Hire rates for shipments of Saudi Arabian crude to Japan, the industry benchmark, have gained 67 percent since Jan. 1, the biggest increase to a start of a year since at least 1999, according to figures from the London-based Baltic Exchange. Rates advanced 0.5 percent to 71.59 Worldscale points yesterday. There"s ?not upward bias right now,? even as supply of vessels remains ?tight,? Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo, said today by e-mail. Bookings of very large crude carriers, or VLCCs, ?slowed down a bit yesterday? and today compared with earlier this week, he said.

OPEC members pledged Dec. 17 to cut 4.2 million barrels of crude from daily output as of January compared with September. The group aims to eliminate a glut that"s creating the biggest oil-at-sea storage program for at least two decades and filling inland storage tanks at Cushing, Oklahoma.

Cuts by OPEC are boosting oil futures on speculation that supply may drop later this year. A trader could buy oil now, keep it for months at sea and sell oil futures that are higher than the spot price.

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 transaction from scratch.

A rate of 71.59 points equates to $73,355 a day, according to the Baltic Exchange. Globally the carriers are making $62,206 a day. Frontline Ltd., the largest owner of the vessels, said Nov. 28 it needs $34,700 a day to break even on each of its supertankers, a 10 percent increase compared with Aug. 21.

www.TurkishMaritime.com.tr

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