Persian Gulf Oil-Tanker Rates May Halt Decline on March Cargoes

By Alaric Nightingale

Feb. 19 (Bloomberg) -- The cost of delivering Middle East crude to Asia, the world’s busiest route for supertankers, may halt a three-day decline as owners wait for the onset of early- March cargoes.

The supply of ships available for hire in the first 10 days of March is “pretty balanced” with the number of cargoes, Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo, said by e-mail today. In practice, not all oil companies can hire the available vessels because of their ship-vetting rules, meaning supply is constrained, he said.

“Owners have kept their nerve so far this week” when demand has waned because of a gathering of oil and shipping traders in London, he said. “With plenty of early March cargoes to come, they should be able to push the market higher come next week.”

S. Oil Corp., South Korea’s third-largest refiner, hired the tanker Millennium for 50 Worldscale points, according to Ellefsen. That’s little changed from the Baltic Exchange’s benchmark assessment of 50.81 points for Saudi Arabian cargoes to Japan, which slipped 0.4 percent yesterday for its smallest decline in three sessions.

Millennium, fitted with a double hull to cut the risk of an oil spill, is scheduled to arrive in the Middle East on March 1, according to ship-tracking data compiled by Bloomberg. The cargo loads between March 1 and March 3 at Ras Tanura, Saudi Arabia’s largest crude oil loading facility.

Frontline Breakeven

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.

A rate of 50.81 points works out at $44,795 a day, according to the Baltic Exchange. Globally the carriers are making $40,975 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.

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