LONDON: Crude oil tanker earnings on the major Middle East route softened on Tuesday as slower enquiry and growing availability took their toll on sentiment.
The world's benchmark VLCC export route from the Middle East Gulf to Japan reached 54.03 in the worldscale measure of freight rates, or $22,570 a day when translated into average earnings, from W55.70 or $24,408 on Friday and W58.81 or $29,925 last Tuesday.
"Quiet conditions and still long tonnage lists kept VLCC rates in check," RS Platou Markets said. "All eyes are still on the oil price development. If the price drops further, OPEC may defend the price by cutting oil production, which would be bad for tankers."
Last month earnings reached their highest level in a year at $45,000 a day, fuelled by a cargo rally, which subsequently ran out of steam.
"Despite a busy start to the week, the AG VLCC market was unable to hold last week's levels," Deutsche Bank said.
A rush of fixings earlier last month from Saudi Arabia to the United States, together with buoyant Asian demand, bolstered sentiment as buyers sought to ensure stable supplies, given growing fears of disruptions due to the tensions with major oil producer Iran.
Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees. VLCC operating costs, including financial costs, are estimated at around $10,000 a day.
Average VLCC earnings have been volatile in recent months, falling below the $10,000 a day level a number of times. They have stayed above $10,000 a day since Feb. 15.
VLCC rates from the Gulf to the United States were at W38.32 from W38.69 on Friday and W39.14 last Tuesday.
"The declining scrapping age of crude oil tankers reflects the tough commercial realities in the tanker market," said chief shipping analyst Peter Sand with trade association BIMCO.
"The weak global economic conditions with low GDP growth rates in primarily the Western economies have lowered demand for tanker tonnage and offset the balance of the freight markets resulting in low earnings and tough trading conditions."
Rates for suezmax tankers on the Black Sea to Med route reached W79.88 or $19,376 a day from W82.94 or $21,725 a day on Friday and W89.58 or $27,094 a day last Tuesday. Last week they hit their highest in just over two months.
"A weaker West African market sent Atlantic suezmax rates lower," Deutsche Bank said. "The suezmax market was also impacted by several fixtures of VLCCs heading West, which consolidated more expensive suezmax cargoes on the cheaper VLCCs."
Cross-Mediterranean aframax tanker rates were at W82.45 or $5,426 a day on Tuesday, compared with W82.64 or $5,211 a day on Friday and W83.18 or $5,407 a day last Tuesday.
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