A pick up in activity in the past few days has not revived the average spot rates of very large crude carriers (VLCCs) from the levels of a week ago as there is still ample tonnage in the market.
"It was a busier week for VLCCs in the Middle East Gulf [Meg], but with such a large overhang of visible tonnage the increased volume failed to create any momentum. This allowed charterers to chip rates down just a little further," said London broker Gibson.
Tankerworld's list of recent fixtures saw ExxonMobil hire the double-hulled Formosapetro Challenger to move 226,000 tonnes of Meg crude from Basrah to Japan for loading on February 20 at WS 38.
SK Oil fixed the newly-built Euronav-owned and operated double-hulled Antarctica to move 260,000 tonnes of Meg crude from Basrah to South Korea for loading on February 17 at WS 35.
Tankerworld data last Tuesday showed the double-hulled M Star fixed by LG Caltex to move 260,000 metric tonnes of Meg crude to China/Taiwan for loading on February 16 at WS 42.
Tankerworld data from January 29 indicated that two VLCC voyages to move 265,000 mt of MEG crude to China/Taiwan for loading on February 6 were fixed by Glasford at WS 52.
"Rates should be coming way back up because the market is tight for tonnage," said Gibson.
Bassøe's report last Friday forecast that Opec's pledges to cut crude output would continue to leave the advantage in rates negotiation with the charterers.
Players are becoming increasingly concerned about lacklustre demand on the back of a global recession.
Bassøe did say, however, that heightened activity last week had at least shortened the tonnage list to a level that may favour owners.
One Clarkson broker was quoted as saying that "the VLCC rates came off quite sharply this week, but rates have bottomed out. Rates should be coming way back up because the market is tight for tonnage".
According to Bassøe, VLCC earnings on Meg-East routes are already at a six-month low, while voyages from West Africa to the US Gulf are hovering close to six-month lows.
Reports, meanwhile, say that Frontline Ltd is running some 20 of the 45 VLCCs it has on the spot market at rates below individual ship break-even levels.
Frontline announced a cash cost break-even rate of $34,700 (Dh127,450) per day for its VLCCs for the fourth quarter of last year, and earnings for both Meg-East and Meg-West routes are said to have fallen a little past the $30,000 mark.
Other owners have significantly lower break-even estimates, such as OSG, which reported expenses for its VLCCs at $18,000 per day for the third quarter.
It has been pointed out, however, that different owners calculate break-even rates differently. "It can cover operating costs, which are about $8,700 per day, but could be much higher if it covers capital costs," a Gibson analyst was quoted saying.
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