Posted on 09/04/2009 6:56:03 PM PDT by Vince Ferrer
Supertanker owners may start refusing cargoes within the next three months unless rates return to a profitable level, said Frontline Ltd., the biggest operator of the ships which carry almost half the world’s oil. Ship owners are contributing $942 a day toward fuel costs to ship Middle East crude, according to the London-based Baltic Exchange. Rates have been below operating costs since July. Should the losses persist, some owners may choose to idle their ships, according to Jens Martin Jensen, Singapore-based chief executive officer of Frontline’s management unit.
“If you see another quarter, then I think owners have to do something,” Jensen said by phone today. “We are subsidizing oil companies.”
The Organization of Petroleum Exporting Countries has cut output by 4 percent this year to 28.4 million barrels a day, according to Bloomberg estimates. Over the same period, the fleet of in-service supertankers has advanced 5.8 percent to 528 ships, according to Lloyd’s Register-Fairplay data on Bloomberg.
The five-member Bloomberg Tanker Index, led by Frontline, dropped 19 percent this year, extending last year’s record 49 percent slump. Frontline rose 3 kroner, or 2.3 percent, to 132.50 kroner in Oslo, valuing the company at 10.3 billion kroner ($1.7 billion).
Returns for Owners
Rental rates on the industry benchmark Saudi Arabia to Japan route climbed 0.6 percent to 30.69 Worldscale points today, their first advance in 11 sessions, according to the London-based Baltic Exchange.
Returns for owners on eastern and western routes from the Middle East reached this year’s peak of $64,146 a day in January. The vessels need $11,603 a day to pay insurance, crew, repairs and other running costs, according to London-based Drewry Shipping Consultants Ltd.
Frontline said its largest carriers needed to earn an average of $31,900 a day to break even in the second quarter, once finance costs were taken into account. They made an average of $38,400, including vessels on longer-term rentals.
The slump is triggering an acceleration in the demolition of aging carriers, according to Cumberland, Maryland-based Global Marketing Systems Inc., the world’s largest cash buyer of obsolete vessels. The number of supertankers sold for scrap may reach a six-year high, the company estimates.
The drop in rental rates prompted A.P. Moeller-Maersk A/S, Denmark’s biggest crude carrier, to seek revisions to orders for new tankers, Kristian Morch, chief operating officer of the company’s oil-shipping unit, said by phone today. The company sold $1.58 billion of stock this week to fund acquisitions in the oil and terminals businesses.
Supertanker Owner
Euronav NV, Belgium’s biggest owner of supertankers, plans to raise as much as $200 million to fund acquisitions of vessels and diversify its financing, the company said today.
Frontline is sailing its carriers more slowly to conserve fuel, Jensen said. Frontline is sometimes “waiting days” for profitable cargoes, he said.
Jensen declined to say whether Frontline would idle its own tankers. Doing so would make the vessels less attractive to hire when they return to service because they lose safety approvals from oil companies, he said. A “handful” of independent owners have already started to reject cargoes because rates are too low, London-based EA Gibson Shipbrokers Ltd., said in a report today.
“If more owners refuse to play, then eventually some upward re-adjustment will develop,” Gibson said. Jensen denied an earlier report that Frontline may remove a vessel from the market next week.
Worth watching.
Yeah that might cause a glitch or two...
bring down the cost and oil will sell, but when algae oil hits, those tankers are going to be carrying dirt.
Am I supposed to feel bad for them at $2.50/gal....screw them
If the U.S. consumer keeps cutting back on spending for fuel, these companies will go bust. It was great fun gouging us in the summer of ‘08, thus killing the goose that laid the golden eggs.
Morgan Stanley to secure supertanker to store crude oil
'The same brokers said that, in addition to the commodities trading arm of Citigroup, at least two other Wall Street names had recently expressed interest in procuring a supertanker for use throughout the year as a giant floating oil container. '
I call BS on their numbers. Oil prices were much lower not too long ago and they were still making money hand over fist.
They see the hand writing on the wall, sooner are later you will need to pay for and take delivery to buy commodities.
Ping.
“The speculators are making the money.”
take the speculators out to sea and leave them there.
As for speculation, this will have more impact on futures prices.
Waste of fuel, making them fertilizer would be better.
The price of oil often is disconnected from the price of shipping the oil.
And why not?
Oil is relatively cheap right now, due to lower demand tracing to the economic downturn.
Yet, it is apparent that the largest consumer of oil -- the USA -- is going to do absolutely nothing to improve its supply situation, thanks to an administration and Congress in bed with the enviro-whackos.
Consequently, oil will go up! Just like it did after the Democrat Congress was elected in 2006...
And what was the Sep 12th, Grand Oil Strategy employed by the Bush Admin?
What regulations were pushed aside in a time of war? Anything? He didn't even get rid of offshore drilling until 06 or 07. If there was a plan, refineries and oil platforms would be coming on line, right now.
Remember your $2.50 a gallon reflects a weaker dollar. Gas is still at $2.50 while demand has shrunk to levels where tankers are being scrapped. You are going to be in for a real shock if demand picks up.
That’s cheap, it is over 3.10 a gallon here in my county in Northern California.
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