Glut of Ships Bad News for Supertanker Owners

Bloomberg News reports that owners of supertankers, losing money for a sixth consecutive quarter, will probably idle the most ships in more than two decades, as they contend with a glut that drove charter rates to the lowest in at least fourteen years. The combination of too many ships and slowing demand growth for oil means that about six percent of the fleet will be anchored in a year, according to Bloomberg's survey of eight brokers and analysts. However that may not be enough to end the slump. This is because it is reported that freight agreements, traded by brokers and used to bet on transportation costs, anticipate rates no higher than $13,819 a day through 2013.

While owners can cut operating costs to as little as $2,000 a day from $12,000 by anchoring ships, it also means no income. This was a statement made by Andreas Sohmen-Pao, CEO of the oil and gas shipping unit of BW Group, which is idling three ships of its own. The global fleet of VLCCs expanded about 9 percent to 570 ships in the past two years, the most since 1983, Clarkson data shows. Owners ordered the greatest number of new ships since the 1970s between 2006 and 2008, when charter rates surged to as much as $289,000. Demand for oil tankers will match fleet capacity by the Northern Hemisphere's next winter, lifting charter rates, stated Peter Evensen, the CEO of Teekay in an interview in London on October 6th.

If you are interested in contacting me,you may reach me at miamipandi@comcast.net or at Houck Anderson at motero@houckanderson.com.

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