A continued slide in Middle East tanker rates to near year lows was expected to end this week by the emergence of Saudi stems and a resumption of Iraqi exports, shipping brokers said.
VLCC tanker operators' earnings hit their lowest levels yet this year as a result of a combination of heavily depressed Middle East tanker rates and fixtures plus high bunker prices, brokers said.
With only eight VLCCs fixed from the Middle East last week, rates to Japan fell to W45 ($4.80 per ton) from around W50 ($5.30) the week before and to about W42.5 ($2.75) for Singapore.
Rates to the U.S. Gulf fared no better, dropping a two and a half points to around W42.5 ($7.00 per ton).
At these rates a round western voyage would bring returns of $13,500 a day for a modern motor vessel and about $4,000 a day for an older turbine ship - well below operating costs.
As a result, VLCC scrapping appeared to be finally taking off with seven units reported sold for demolition in the last ten days. Brokers have long said the fleet would need to be cut before rates rose significantly.
But with 80-plus vessels available in the Middle East over the next few weeks, rates were not expected to do a great deal more than stop declining in the immediate future.
Meanwhile, last week's hot spot - the North Sea Aframax
market - cooled down.
After attaining highs of W125 ($4.60 per ton) rates for 80,000-ton vessels on U.K./Continent fixtures fell back to W110 ($4.00) by the end of the week.
But the continuing absence of a number of Alandia's tankers due to financing problems and arrests should lead to a further strengthening in rates before the end of the month, brokers said. - (Reuters)