LONDON: Crude oil tanker earnings on the major Middle East route softened further on Monday as slower business ate into gains which saw rates rise to their highest in two years last week.
The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W61.73 or $43,386 a day. That compared with W67.33 or $52,295 a day on Friday and W69.27 or $56,031 a day last Monday. Last Wednesday average earnings reached $61,630 their highest level since Feb 2010.
"The strength was short-lived with levels dropping quickly in the second half of (last week), with the trend expected to continue into (this) week as Chinese New Year approaches," broker SSY said. VLCC rates from the Gulf to the United States were at W37.23 on Monday versus W38.92 on Friday and W40.19 last Monday.
"Spot tanker rates so far this year have been rather strong, though they have notably weakened in recent days," Omar Nokta of Global Hunter Securities said on Monday.
"Activity levels have remained generally robust but vessel availability has been on the rise." Analysts say the crude tanker market was expected to remain volatile in coming weeks.
In recent weeks Black Sea and Mediterranean crude tanker rates rallied to their highest levels since 2008 as weather related disruptions in the Turkish Straits raised the cost of transporting cargoes. Gains though have come off of late.
Rates for suezmax tankers on the Black Sea to Med route fell to W115.83 in the Worldscale measure of freight rate or $54,441 a day when translated into average earnings. That compared with W125.21 or $62,541 a day on Friday and W186.04 or $116,423 a day last Monday.
Cross Mediterranean aframax tanker rates were at W129.75 or $34,162 a day on Monday. That compared with W136.75 or $38,132 a day on Friday and W349.50 or $162,433 a day last Monday.
"Volatility is also very evident in the crude oil tanker sector as supply and demand factors have oscillated, creating enormous spikes, and dramatic capitulation," said consultancy Hartland Shipping Services.
"We have had the usual fog in the Bosphorus Strait causing lengthy transit delays, and we had a surge in prompt aframax demand ex Med and Black Sea and in suezmax demand ex Med, Black Sea and West Africa, before it all collapsed."
In previous years, winter weather, especially heavy fog, has regularly shut the Bosphorus and Dardanelle shipping lanes, suspending for days at a time the only navigable waterway linking Russia's vital Black Sea oil ports to the wider world.
"The past few weeks have proven to be a wild ride for the aframax sector. Although freight rates are falling precipitously, recent volatility suggests that this market may still have a heartbeat," brokerage Poten & Partners said.
Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees.
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