Oil Companies May `Panic' on Tanker-Rate Outlook

NTBKtrader · Intermediate Crude Joined: Oct 19, 2004 Posts: 605

Aug. 6 (Bloomberg) -- Oil-tanker rental rates may rise after last week's 46 percent slump spurred owners to slow their vessels, reducing supply and increasing costs for oil producers and refineries who hire the vessels.

Owners are telling captains to sail more slowly, according to three shipbrokers. The last time that happened, in the final months of 2007, rental rates posted the fastest two-month gain in at least 16 years, increasing costs for oil producers seeking to ship supplies to refineries.

The CHART OF THE DAY shows how slower sailing speeds at the end of last year helped bolster hiring rates. The average speed of very large crude carriers, or VLCCs, including those at anchor, has declined 3.8 percent to 10.21 knots since July 12.

``Panic will be moved from owners to the oil companies,'' Nikos Varvaropoulos, an official at Optima Shipbrokers, Greece's largest, said yesterday. The advance in the next several months may be ``even better'' than at the end of last year, he said.

Vessels on average slowed 20 percent to 12 knots in the final months of last year, according to a May 2 regulatory filing from Frontline Ltd., the world's largest owner of the vessels.

The hiring rates are in Worldscale points, which 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.
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