The tanker market is fast approaching record lows, with little prospect of recovery this summer, brokers said on Tuesday.
"It's back to the bad old days," said one London broker. "The market's gone down the pan." He blamed the stand-off between Iraq and the United Nations for the stagnation.
He said that the 280,000-ton Napa had been fixed from the Mideast Gulf to Thailand in the first week of July at W38, while two others had been fixed to Singapore at W40.
He said that not since the market hit W30 several years ago had he seen it so bad. "I don't see any relief this summer," he added.
Even if OPEC were to agree to increase output at its next meeting on July 3 to account for the Iraqi stand-off, brokers said, it would take a while to impact on the tanker market.
"Most of the fixtures for July would have been done by then," said one.
Iraq halted its 2.1 million barrels a day of U.N.-supervised crude sales on June 4 in protest at Anglo-American plans for a revamp of Gulf War sanctions.
But a key European diplomat said last week that if there were no agreement on the sanctions review by the end of the extension on July 3, Washington would likely endorse a no-changes six-month rollover of the humanitarian program.
Iraq has said it would resume shipments, some five percent of world exports, if the oil-for-food programme were renewed as normal.
OPEC delegates said on Monday the likelihood of a supply boost in July would be reduced if Iraq restarted its normal oil sales.
However,
tanker brokers said the only silver lining to the cloud was that the slump would encourage owners of older tankers to have them scrapped, thus restoring the supply demand balance.
"Bunker prices are pretty high now, and you have to ask whether the older
turbine tankers can be covering their operating costs," said one. "It has to be borderline."
He said that with a large number of new VLCCs due for delivery in the fourth quarter a huge amount of scrapping was essential to resuscitate the market before then.