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Gulf-Asia VLCC rates heading South

Gulf-Asia VLCC rates heading South

Hong Kong: At a time of year when VLCC owners could traditionally expect Middle East Gulf to Asia rates to be on the rise, they appear this week to be heading in the opposite direction.

Brokers had predicted a bounce-back this week as charterers moved to complete their October programmes after the holiday season, but there is no sign of it yet. MEG/Japan rates have fallen below WS80 on single hull tonnage taking earnings below $50,000 a day. Chinese charterer Zhuhai Zhenrong has succeeded in persuading an owner to take a poor WS67.5 to cover a 265,000 tonne cargo MEG/China. With some 78 modern vessels available to load in the Gulf over the next 30 days there seems to be little upside prospect.

Nevertheless the strong third quarter - traditionally a weak one - persuaded investors to pile into tanker orders despite continuing high newbuilding prices. London broker EA Gibson calculates the quarter saw 118 tanker orders booked of MR product carrier size and above including 18 VLCCs - equivalent to 5% of the trading fleet.

Investors seem to have concluded that suezmaxes have a strong future with no less than 34 new  orders for this size. With much of the incremental oil
supply over the next few years due to come from new fields in North and West Africa and through the BTC pipeline to Ceyhan, suezmaxes are predicted to be major beneficiaries.

As this year's market has shown, its traditional seasonal demarcation is
disappearing to be replaced by a more volatile and less predictable
situation.  [11/10/06]