Mideast VLCC earnings drop to year’s low

VLCC (very large crude carriers, or oil tankers capable of carrying up to 250,000 dead weight tonnage) owners in the Middle East are under severe pressure as the monthly average VLCC spot charter earnings on the Middle East-Japan route have sharply declined last month, industry estimate says.

Last month (July) has proved to be the weakest month of this year for very large crude carriers.

Daily earnings on the Middle East/Japan trade have averaged $23,500 (Dh8,6315) a day, the lowest level of returns since October 2009 and considerably below the average of $57,000 a day achieved in the first six months of this year, according to a latest report by London-based EA Gibson Shipbrokers.

However, even at this level, VLCC earnings remain well above the lows seen in 2009 ($11,000/day in September last year) and are around double the level needed to cover fixed operating expenses, the report said.

Middle East-Japan route is one of the busiest routes especially for crude trade.

According to another weekly report by Fearnleys, the VLCC market continued to deteriorate with owners accepting rates at or below operating cost. Low demand and a steady growing position list speak for itself and leave no sign of imminent change of present trend.

Surprisingly, this disappointing performance (from a ship owner’s point of view) goes against key tanker fundamentals.

On the demand side, there are large-scale increases in world oil demand, with global consumption recovering to 86.6 million bpd in the second quarter of this year, up by a staggering 2.7 million bpd year-on-year, Gibson Shipbrokers said.

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