Ship Glut Pressures Mideast Crude Tanker Rates

Crude oil tanker earnings on the major Middle East route remained under pressure on Tuesday as the market struggled to absorb a glut of tankers due to slower business.

The world's benchmark VLCC export route from the Middle East Gulf (MEG) to Japan reached W36.71 in the Worldscale measure of freight rates, or $5,550 a day when translated into average earnings.

That compared with W36.85 or $5,430 a day on Monday and W38.42 or $8,273 a day last Tuesday.

"(VLCC) rates remain at a relatively weak level due to high vessel availability," Pareto Securities said. "With high vessel availability over the next month we see limited room for a sudden uptick."

In January, average earnings reached just over $61,000 a day - their highest since February 2010, before the rally lost steam.

"There is real worry about what will happen for June dates with an inadequate volume creating a larger over-supply of vessels as the summer months are soon upon us," RS Platou Markets said separately.

"That said, we expect refinery demand to revive strongly from June as Asian refinery maintenance ends. Evidence of higher activity should lift spirits."

VLCC rates from the Gulf to the United States were at W25.69 on Tuesday versus W25.77 on Monday and W26.35 last Tuesday.

Rates for suezmax tankers on the Black Sea to Med route softened to W56.90 or $1,154 a day. That compared with W57.15 or $1,414 a day on Monday and W56.77 or $1,176 a day last Tuesday.

Cross Mediterranean aframax tanker rates were at W77.50 or $3,019 a day on Tuesday. That compared with W77.45 or $2,947 a day on Monday and W78.20 or $3,312 a day last Tuesday.

"Rates for suezmax voyages in the Med and Black Sea regions were roughly flat week-on-week on little activity," said Deutsche Bank analyst Taylor Mulherin.

"Spot earnings in the aframax market did not hold up as well ... Weakness was driven largely by reduced activity in Med region."

Black Sea and Mediterranean crude tanker rates are still off their peak in January when they rallied to their highest since 2008 as weather-related disruptions in the Turkish Straits raised the cost of transporting cargoes.

Average earnings per day are calculated after a vessel covers its voyage costs such as bunker fuel and port fees.

(By Jonathan Saul; Editing by David Evans)