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Tanker rates to double as vessels are scrapped

Tanker rates to double as vessels are scrapped

   A combination of vessel scrapping and delayed orders could conspire to drive supertanker rates to double current levels by the end of the year, according to a Bloomberg report this week.

   Citing a forecast from Oslo-based Fearnley Consultants A/S, the price on the benchmark Saudi Arabia to Japan route is projected to rise to $32,000 a day in the fourth quarter from $16,000 today.

   Fueling the expected rise is the fact that as much as 20 percent of the current fleet will be scrapped due to new regulations on single-hull tankers coming into effect sometime in 2010. The report said all 110 single-hull tankers in service will be decommissioned over the next year.

   Exacerbating the supply scenario is the fact that banks are reticent to fund shipbuilding efforts in a down demand cycle. Oil demand is expected to grow 1 percent this year, but with declining capacity, rates are expected to increase after sinking to levels last seen during the 1970s oil crisis.