Owners of the largest tankers raised daily rates to as much as $90,000, far above the $10,000 a day it costs an owner to pilot a ship laden with Mideastern crude to Asia.Eddie Seal/Bloomberg
The crash in oil prices that sent the Canadian economy reeling has been a gift to the oil shipping business.
Demand and rates for tankers have soared in the wake of last summer's 50-per-cent plunge in crude prices as the Organization of the Petroleum Exporting Countries boosted output and China stocked up on cheap oil.
Owners of the largest tankers raised daily rates to as much as $90,000, far above the $10,000 a day it costs an owner to pilot a ship laden with Mideastern crude to Asia. In 2012 and 2013, rates averaged about $25,000 a day.
"The lower price environment has been a positive for crude tankers," said Erik Nikolai Stavseth, an Oslo-based shipping analyst with Arctic Securities AS.
In addition to strong demand for their fleets, tanker owners, including China Ocean Shipping Co. Ltd., Euronav, Mitsui OSK Lines Ltd., have also seen fuel prices cut in half as crude's price fell.
The cheaper fuel (a tonne of bunker fuel costs about $270, or less than half of what it cost when oil was $100 a barrel) has allowed ships to steam faster, and to reach new markets profitably. Some tankers carrying refined petroleum to European markets are skipping the Suez Canal shortcut and sailing around Africa's tip, a longer route that allows them to stop at more ports, Bloomberg News reported. Traders have been using tankers as floating storage in hopes of cashing in on the higher future prices.
"Asian demand continues to be the main driver of global crude oil trade, as majority of refinery capacity additions are taking place in this region," said Rajesh Verma, a Delhi-based analyst with Drewry Shipping Consultants Ltd. "Despite economic slowdown in China, the country's oil imports are strong as it is importing oil to fill its strategic petroleum reserve."
The low-price buying in Asia has coincided with a decrease in the amount of oil being shipped to the United States from West Africa, Middle East or Venezuela. This is because the United States has significantly boosted domestic production of energy while cutting imports.
This means the world's oil tankers are travelling greater distances than in past years.
"That crude's been finding a home in Asia. Venezuela through the Caribbean to the U.S. Gulf Coast is a significantly shorter move than Venezuela to China. We had a lot of crude, and the crude was moving a longer haul. The combination of those two with a period of time when there wasn't a lot of supply growth in the [supply] of tankers themselves is really what sparked [tanker] rates to move much higher," said Christian Wetherbee, a New York-based equities analyst with Citigroup.
Historically, the link is weak between crude prices and tanker rates, Mr. Wetherbee said. "The ships themselves are the commodity, not crude. It's really supply and demand for ships that drives the rates," he said by phone.
Mr. Wetherbee expects the increase in fleet size to remain in the single digits over the next few years, which will keep demand strong for the world's 700-strong fleet of very large crude carriers (VLCCs), which take two years to build and can hold two million barrels of oil.
Daily rates for VLCCs are currently about $30,000, as refineries close in the summer for maintenance, but could double by the fourth quarter, as demand for heating oil and other refined products kicks in, Mr. Stavseth said.
Eric Atkins