Key Mideast Markets Surge On Erika Factor

Mideast-Far East crude oil tanker freight rates leapt skywards for the second day in a row as the Erika-effect took hold, shipping brokers said on Jan. 21. Japan-bound VLCCs added 10 Worldscale points to W65 ($7.00 per ton) in a two-day surge from W48 ($5.25). A rush of charterers to secure modern tonnage for February cargoes was squeezing the availability of quality ships in the region. "It is the Erika factor combined with a rush to fix February cargoes that has caused this spike in rates," a broker said. Structural failure is suspected for the TotalFina-chartered 25 year old Erika breaking in two in December and spilling viscous fuel oil on French beaches. Shipbroker E.A. Gibson said several oil majors had begun specifying that older tankers and those without extra structural condition assessments should not be employed. "The last 48 hours has seen evidence that quality tonnage is de rigeur for voyages to the main crude and products discharge areas," Gibsons said in its weekly report. Other Asian destinations were following suit with Korea and Singapore also adding ten points. With only 50-odd VLCCs in the region over the next month, compared with a recent norm of about 80, brokers expected market strength to continue for up to two weeks. A glut of westbound Iraqi oil cargoes to the U.S. in late December combined with pre-millennium chartering to the east had drawn more vessels out of position than normal, a broker said. Rates to the U.S. were also rising but not as volatile, brokers said. VLCCs to the U.S.Gulf were quoted at W50-52.5 ($8.75) - up five points on Jan. 20. Million-barrel Suezmax tanker markets were generally flatter with rates not moving as strongly, brokers said. But demand for transatlantic cargoes was picking up with rates at W90 ($7.00 per ton). - (Reuters)