Oil Tanker Rates Doubling on Lower Speeds, Libya Uprising

[phantom power]

Supertanker owners are coping with the second-highest fuel costs on record by sailing ships at the slowest speeds in at least three years, reducing vessel supply and bolstering charter rates.

The carriers, each bigger than the Chrysler Building, moved at an average of 10.7 knots last month, about a knot slower than a year ago, according to data compiled by Bloomberg. The drop cuts the fleet’s capacity by 9 percent, according to Pareto Securities AS, an Oslo-based investment bank. Frontline Ltd., A.P. Moeller-Maersk A/S, Overseas Shipholding Group Inc. (OSG) and Euronav NV, which control 16 percent of all supertankers, told investors in recent weeks they are cutting speeds.

The combination of what the industry calls ultra-slow steaming and violence in Libya, Africa’s third-biggest oil producer, more than doubled daily returns for owners to $29,647 since the end of February, according to the London-based Baltic Exchange, which assesses more than 50 maritime routes. Traders of forward freight agreements, used to bet on or hedge shipping costs, anticipate the gains will last, with second-quarter contracts at $28,894.

“Whoever says it’s not positive is on the wrong side of the trade,” said Doug Mavrinac, the analyst at Jefferies & Co. in Houston who correctly predicted a rally in charter costs in 2009. “When ships are going slow you need additional ships. It does essentially absorb excess fleet capacity.”

http://www.bloomberg.com/news/2011-03-09/oil-tanker-rates-doubling-on-lower-speeds-libya-uprising-freight-markets.html