VLCCs Earning $100,000 Per Day

Daily earnings for tankers carrying two million barrels of oil have reached $100,000 a day from the Persian Gulf to South Korea, the highest in nine months. The new rates are due to a shortage of ships available in early December. The upward momentum has cargo owners on the defensive. The rate, measured by the Worldscale standard, was WS 159.75, up from WS 150 yesterday.

At that rate, owners of modern, double-hulled, very large, crude carriers (VLCCs) can earn about US $100,880 a day on the 39-day round trip between the Persian Gulf and South Korea. The rate is up approximately $7,940 a day from Monday. Frontline Ltd, the world's biggest oil tanker company by capacity, requires $27,749 a day to break even on each of its 40 VLCCs.

Exxon Mobil Corp, the biggest US oil company, signed the 'La Paz' for a 280,000 ton cargo to the U.S. Gulf Coast, loading Nov 11. The rate was WS 130, little changed from Monday.

Earnings are $84,450 a day on the 65-day trip from Saudi Arabia to the Gulf of Mexico, based on ballasting, or sailing with no cargo, through the Suez Canal on the return journey. That's after the shipowner has paid costs such as fuel and port fees.

VLCCs are usually signed up about a month in advance, and charterers have about 24 hours to cancel bookings. At WS 160 it costs $2.82 a barrel or $21.03 a ton to ship crude to Japan. Shipping costs are $3.85 a barrel and $28.70 a ton to the US.

Worldscale points are a percentage of a flat rate for a specific route. Flat rates, set in U.S. dollars a metric ton, are revised each year by the London-based Worldscale Association.

Thus far, 118 VLCCs have been signed for November cargoes out of the Middle East, compared with 117 October bookings and 118 for September.