Crude oil tanker earnings on the major Middle East route fell to their lowest in nearly two months Monday as players looking to hire vessels cut bookings to get cheaper rates. Market players said attention was focused on the potential for more cargoes to be stored on tankers at sea after the United States sold more than 30 million barrels of crude from the Strategic Petroleum Reserve (SPR) in its largest-ever auction of emergency supplies Friday. The world's benchmark VLCC export route from the Middle East Gulf to Japan slipped to W49.08 in the Worldscale measure of freight rates, or $2,749 a day when translated into average earnings, from $49.38 or $3,171 a day Friday and W52.82 or $9,023 a day last Monday. Average earnings were at their lowest since May 6. "Charterers maintained their winning formula of drip feeding interest into the market place, and consequently rates tracked further down," broker E.A. Gibson said. Average VLCC earnings had pushed above the $10,000 a day from June 8 before dropping again below the key level on June 27. "The month is not even at the half-way-point yet in expected fixtures and there is a need for increased activity for the present levels to be sustained, as the list looks ample," broker P.F. Bassoe said. Prior to the move higher in June, VLCC rates had hovered for several weeks around or below operating costs, estimated at around the $10,000 a day level, as the market had struggled with growing tanker availability despite healthy crude oil demand. "The outlook for the crude sector seems to show further weakness in the second half of the year as we expect in the region of 40 more VLCCs, 25 more suezmaxes and 30 more aframaxes to be delivered from June until December on top of those already delivered in the first five months of the year," broker ICAP Shipping said. VLCC rates have been volatile in recent months due to a supply overhang caused in part by the end of a trading play, which led to storage of millions of barrels of crude oil on tankers at sea. "Last year the tanker market still had considerable support from floating storage which, at its peak, kept 47 VLCCs out of the market; this has now dwindled to just 19," broker E.A Gibson said. "Clearly the next six months will continue to be a 'white knuckle' ride, with many of the riders attempting just to hold on." Shipping and trade sources said Friday enquiry to store crude oil on tankers at sea in the US Gulf was rising after the SPR auction. Brokers said Monday there had still been few indications of floating storage deals done, adding the United States Independence Day holiday had also curtailed activity. VLCC rates from the Gulf to the United States were at W37.56 from W37.71 on Friday and W38.89 last Monday. VLCC rates from West Africa to the US Gulf were at W50.00 from W49.75 Friday and W50.27 last Monday. Cross-Mediterranean aframax tanker rates reached W91.83 from W91.58 on Friday and W93.54 last Monday. Rates for suezmax tankers on the Black Sea to Med route to reached W73.25 from W72.42 Friday and W68.73 last Monday.
