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Mideast crude tanker rates hit by weak cargo trade

Wednesday, 3 Oct 2012 | 1:04 PM ET

* Tanker market set to remain pressured into 2013

* Aframax market seen stable for now

By Jonathan Saul

LONDON, Oct 3 (Reuters) - Crude oil tanker earnings on the major Middle East route were weaker on Wednesday as slow business and a surplus of vessel availability took their toll on rate sentiment.

The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W35.73 in the worldscale measure of freight rates, or -$5,852 a day when translated into average earnings, compared with W36.67 or -$4,522 on Tuesday and W36.59 or -$4,531 last Wednesday.

"With the Chinese speaking world now away on holiday it is even quieter than usual with very limited interest from charterers," broker Fearnleys said on Wednesday, referring to public holidays in China this week.

"Given that there is even less inquiry than usual and an oversupply of tonnage, owners have virtually no chance of securing decent rate levels now and in the foreseeable future."

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.

Average earnings reached a record low level in late August of -$7,850 a day.

Average earnings turned negative on July 5 for the first time since Nov. 3 last year. They turned positive for a single session on Sept. 24 before once again falling back into negative territory.

Last year on Aug. 1, VLCC average earnings turned negative for the first time since the Baltic Exchange started collating the data in 2008 as worsening conditions took their toll.

In April of 2012 earnings reached their highest in a year at about $45,000 a day, fuelled by a cargo rally that subsequently ran out of steam.

VLCC rates from the Gulf to the United States were at W23.45 from W23.57 on Tuesday and W24.68 last Wednesday.

Tanker players said downside risks remained for the sector, given worries about the global economy and the fact that more tankers, ordered when times were good, were still to join the global fleet.

Ole-Rikard Hammer, head of research with RS Platou Economic Research said the world economy continued to lose momentum in the third quarter of this year.

"The worsening slowdown in China is of particular importance as the country has been responsible for 40 percent of global oil demand growth since 2009," he said.

"Against this backdrop it seems clear that tanker market fundamentals have weakened for 2013 and the need for fleet capacity adjustments has increased yet further."

Rates for suezmax tankers on the Black Sea to Med route reached W60.83 or $1,802 a day, from W59.63 or $705 a day on Tuesday and W56.92 or -$1,508 a day last Wednesday.

Cross-Mediterranean aframax tanker rates were at W76.45 or $916 a day on Wednesday, compared with W76.23 or $648 day a day on Tuesday and W76.14 or $759 a day last Wednesday.

"Not much change in the aframax sector, with rates holding stable this week as interest was minimal from charterers while at the same time owners put significant effort to keep rates from dropping lower," broker Intermodal said on Wednesday.

(Reporting by Jonathan Saul; editing by James Jukwey)

((jonathan.saul@thomsonreuters.com)(+ 44 207 542 4357)(Reuters Messaging: jonathan.saul.thomsonreuters.com@reuters.net))

Keywords: TANKERS SHIPPING/CRUDE