The world's leading crude oil freight routes were closing on three-and-a-half year lows on Friday, as bulging ship supply, long-standing Opec cuts and high stocks in the United States dragged on rates.
Ship brokers said VLCC freight rates from the Gulf to Japan, the world's benchmark crude route, were trading at an average of W59, close to a year low of W52 hit in January.
Below that, W50.5 was struck in October 2003, according to Reuters data. Brokers said rates averaged $30,000 to $40,000 a day to Asia, down from closer to $50,000 in the last couple of weeks. Rates for VLCCs from the Gulf to the United States were similarly pressured, with rates trading at an average of W50, five points short of a low for the year. Beyond that costs on the major route were close to a four-year low of W42.50 hit in August 2003.
Industry sources said the steep drop had been driven by excess tonnage accumulating in the Gulf with reports of twice as many vessels as cargoes to load. High stocks and low refinery runs in the United States - inventories hit nine year highs last week - and Opec cuts were also weighing on costs. Consultancy Oil Movements said on Thursday oil in transit from Opec producers, excluding Angola, had fallen in a surprise counter-seasonal move.
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