Crude oil tanker earnings on the major Middle East route inched higher, helped by firmer cargo trade, although the market continued to struggle with surplus vessel availability.
The world's benchmark VLCC export route from the Middle East Gulf to Japan reached W33.44 in the worldscale measure of freight rates, or -$1,530 a day when translated into average earnings, which indicates shipowners are losing money on journeys.
That compared with W32.85 or -$2,503 a day on Friday and W32.36 or -$3,514 a day last Monday.
"The AG (Middle East Gulf) VLCC market was fairly firm for a second week in a row, but an ample, although declining tonnage list remains in the region," Deutsche Bank said in a report.
"The continued decline in the forward supply could be a catalyst for rate improvement in the VLCC market, but rates have nowhere else to go but up from current trough levels."
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.
Brokers said the market remained stuck in a recent range due to the glut of vessels, adding that firmer rates had also been helped by lower bunker fuel costs.
"Aware that fundamentals remain strongly in their favour amidst a long list of tonnage, charterers were in no hurry to conclude deals. As such, owners have been unable to attract higher rates," broker SSY said.
They have posted negative earnings for 33 sessions in a row - the first negative stretch since November.
In late November, earnings jumped to their highest in nearly six months, helped by firmer fixture activity.
VLCC average earnings turned negative for the first time in August 2011 since the Baltic Exchange started collating the data in 2008 as worsening conditions took their toll.
VLCC rates from the Gulf to the United States were at W18.00 on Monday versus W17.96 on Friday and W17.80 last Monday.
Rates for suezmax tankers on the Black Sea to Med route reached W68.13 or $14,142 a day.
That compared with W68.09 or $14,017 a day on Friday and W71.46 or $17,255 a day last Monday.
"In the Mediterranean/Black Sea activity eased and supply was in excess of demand. Overall, suezmax spot rates were essentially flat week-over-week," Global Hunter Securities said on Monday.
Cross-Mediterranean aframax tanker rates were at W82.82 or $7,947 a day on Monday, compared with W85.34 or $9,296 on Friday and W85.45 or $9,637 a day last Monday.
Tanker players said downside risks remained, given modest oil demand and the fact that more tankers, ordered when times were good, were still to join the global fleet this year.
"Over the coming six months, we expect some uptick in spot (VLCC) earnings. As has so often been the case over the past two years though it will not be strong or sustained," consultants MSI said in a report.
Source: Reuters