Persian Gulf Tanker Rates May Extend Advance on Jump in Hirings

By Alaric Nightingale

Aug. 27 (Bloomberg) -- The cost of shipping Middle East crude to Asia, which yesterday rose for the first time in eight days, may advance after oil companies booked more vessels, reducing the supply of carriers available for hire.

Refiners hired eight very large crude carriers, or VLCCs, to load Middle East crude, according to a report today from Barry Rogliano Salles. That's more than double the daily average, based on the Paris-based shipbroker's monthly loadings data of 104 cargoes a month.

Rates ``bottomed out'' yesterday, spurring several oil companies to seek vessels at the same time, Halvor Ellefsen, a tanker broker at SeaLeague AS, said in an e-mailed note today. There remain ``a lot'' of cargoes that need to be assigned to vessels, and those bookings should buoy rates for the next several days, he said.

SK Energy Co., South Korea's largest oil refiner, hired the VLCC Atlantic Liberty for 77.5 Worldscale points, according to a report today from Oslo-based PF Bassoe AS. That's 3.7 percent above the London-based Baltic Exchange's benchmark assessment of 74.22 points for Asia cargoes.

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.

Hire 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.

Rental income jumped 61 percent yesterday to $14,016 a day after paying for fuel costs and port fees, according to the Baltic Exchange. For Saudi Arabia-to-Japan cargoes, income more than doubled to $13,101 a day; for shipments to the U.S. it added 24 percent to $14,931 a day.

Frontline Ltd., the world's biggest VLCC operator, said Aug. 22 it needs $31,400 a day to break even on each of its supertankers. The company's daily operating expenses, including insurance, crew and routine repairs, was $11,560 per ship.

To contact the reporter on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net