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Lloyds List: Slower demand depresses VLCC rates

Published: May 31, 2007

Tankers

LACK of demand is pulling down all tanker markets, especially very large crude carrier rates, with little relief for owners in the short term, writes Martyn Wingrove.

Charter rates are falling for double hulled VLCCs as refinering companies drip-feed the market with inquiries and hold back on chartering tankers.

Good availability of tankers is helping charterers to push down the cost of ship-ping crude to their refineries, but owners will be wondering when demand will pick up.

The West African market has been hit particularly badly by low demand as militant action in Nigeria has sabotaged pipelines and terminals, slashing the region’s crude exports.

This week Shell has been forced to slow oil production to the Bonny terminal after militants attacked a pipeline. This is on top of closures at the Forecados and Brass terminals in the Niger delta.

New President Umara Yar’Adua has promised to tackle the violence in the Niger delta and improve production levels, but this may take some time.

‘It is a quiet market with slow demand pulling all tanker markets down,’ said a London broker with Galbraiths. ‘There are still a fair few June cargoes to cover but charterers are holding back.’

The softening demand for cross-Atlantic voyages means VLCCs are securing rates of W75 to take West African cargoes to the US Gulf, down from W80 last week.

VLCCs are being fixed at rates of W67.5 to carry Gulf of Guinea crude to Asian terminals this week, with Formosa paying this rate to book SK’s 2003-built C Champion (317,614 dwt) to take a Nigerian cargo to Taiwan.

London brokers said rates for double-hulled VLCCs moving Middle East crude to Asia had fallen to W75, from highs in the W90s last week. Single-hulled tonnage is being fixed at rates of W65-W70.

Middle East loadings up to the end of June are available for oil companies so there are many fixtures still to be finalised. This should keep brokers fairly busy for the next few weeks, then the July stems will begin to emerge.

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