Supertanker Rates Rise as Protests May Not Disrupt Ship Traffic

http://www.bloomberg.com/news/2011-01-31/supertanker-rates-rise-as-protests-may-not-disrupt-ship-traffic.html

The cost of shipping Middle East crude oil to Asia, the world’s busiest route for supertankers, advanced on speculation Egypt’s protests won’t disrupt traffic.

Charter rates for very large crude carriers, or VLCCs, on the benchmark Saudi Arabia-to-Japan voyage increased 1.8 percent to 45.90 Worldscale points, according to the London-based Baltic Exchange. Daily earnings from the journey rose 7.5 percent to $7,296. Frontline Ltd., the biggest supertanker operator, needs $31,300 a day to break even on a VLCC, including financing costs.

“Only 10 percent of the total number of reported VLCC fixtures last year are on the AG-West run, hence delays would probably not be material to the market balance,” Martin Korsvold, an analyst with Pareto Securities AS in Oslo, said in an e-mailed note today. The AG-West run from the Persian Gulf to the Atlantic Ocean.

Egypt’s Suez Canal, used to carry 8 percent of seaborne trade, remained open today after protests against President Hosni Mubarak, with shipping lines saying they had no plans to divert vessels. The waterway is the fastest crossing from the Atlantic Ocean to the Indian Ocean, according to the Suez Canal Authority.

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 metric 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.

Daily returns from suezmax tankers that haul 1 million- barrel cargoes, half as much as VLCCs, rose 13 percent to $9,945, according to the exchange. They have more than doubled since Jan. 24. Returns from aframaxes that carry 650,000 barrels jumped 17 percent to $2,137.

To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.