North Sea tanker rates may rise after Russian slowdown ends

Mar 14, 2007 01:00 AM

The cost of transporting 80,000 ton consignments of North Sea crude oil to European refineries, which gained for three of the past four days, may rise further as exports from Russia's biggest oil port return to normal after a slowdown.
Transneft, Russia's state-run pipeline monopoly, cut four cargoes from the port of Primorsk between March 20 and March 23. Refineries are now looking beyond those dates to hire carriers and supply is becoming constrained, said Jean-Francois Vincke, a freight trader for Riverlake Shipping in Geneva.

Availability of tankers is “tighter for the end of the month,” Vincke said, adding that will be enough to lift hire rates for bookings at the end of March. Freight rates from Primorsk and the North Sea move in tandem as cargoes from Primorsk, located by the Gulf of Finland, are transported to Europe through the Baltic Sea and the North Sea.
Vitol hired the carrier Pelagos to load from the Russian port at 115 Worldscale points, about 10 % above previous vessel-hire rates, according to Riverlake. That compares with a benchmark rate for shipments across the North Sea of 103.41 Worldscale points, according to the London-based Baltic Exchange.

Worldscale points are a percentage of a nominal rate, or flat rate, for different routes. Flat rates, quoted in $ a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates. The revised rate seeks to make every voyage pay $ 12,000 a day to owners based on a 75,000-ton cargo.
Based on rates of 103.41 Worldscale points, owners of double-hulled Aframax vessels can earn about $ 22,084 a day on the seven-day round trip between Hound Point, Scotland, and Wilhelmshaven, Germany, according to a formula by R.S. Platou, an Oslo shipbroker, and Bloomberg bunker prices.

Source: Bloomberg
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