The cost of shipping Middle East oil to Asia, the world’s busiest route for supertankers, slid for a third day because there are more ships than cargoes.

Charter rates on the industry-benchmark Saudi Arabia to Japan route
declined 1.7 per cent to 42.67 Worldscale points, yielding owners
returns of US$17,567 a day, according to data from the London-based
Baltic Exchange. The bourse’s prices are used to settle freight
derivatives bets and hedging contracts.

‘Few cargoes combined with too many ships keep fuelling the downward
trend,’ Oslo-based Fearnley Consultants said in a report on Wednesday.

Owners are battling the combined effects of expanding fleets and
reduced supply of cargoes. The number of in-service very large crude
carriers (VLCCs) has grown 5.2 per cent to 525 vessels this year,
according to Lloyd’s Register-Fairplay data on Bloomberg.

By contrast, Middle East members of the Organisation of Petroleum
Exporting Countries (Opec) have cut their combined output by 2.8 per
cent to 19.5 million barrels a day.

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 US dollars a tonne, 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.

Source: Bloomberg

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