Freight rates to Asia soar with high demand<\/p>\n
LONDON (Reuters): The market is booming for very large crude
\ncarriers (VLCC) with freight rates to Asia hitting their highest
\npoint since the 1991 Gulf War.<\/p>\n
The price of transporting crude oil from the Middle East to
\nJapan has reached almost $12 a ton, nearly double the rate a year
\nago, on surging Asian demand and a shortage of modern,
\nenvironmentally sound ships, brokers and analysts said.<\/p>\n
Freight rates have been forced up due to an unusually large
\namount of oil in transit -- almost 460 million barrels, a level
\nrarely seen since the early 1990s and up 30 million barrels since
\nlast year, according to Oil Movements, a British weekly
\nnewsletter.<\/p>\n
"Volume has been building at around 0.4 million barrels per
\nday since mid-year, and is probably not too far away from
\nstretching the capacity of the transport system," the newsletter
\nsaid in its latest issue.<\/p>\n
Oil Movements publisher Roy Mason said that although the
\nJapanese economy was sluggish, booming demand in countries such
\nas South Korea, Thailand and Taiwan more than made up for this.<\/p>\n
"Japan is important but it is the others that are generating
\nthe good rates," he added.<\/p>\n
The booming U.S. economy was also pushing up long-haul oil
\ndemand, Mason said.<\/p>\n
"Long-haul oil trade is up partly because the short-haul surge
\nin output has been much slower than the industry had been
\ncounting on.<\/p>\n
"Long-haul has substituted for short-haul," Mason said.<\/p>\n
Tanker analysts also said the surge in VLCC rates over the
\nlast three weeks was also a legacy of the 1970s boom in
\nshipbuilding, with many of these now elderly vessels still active
\neven though they are increasingly unwelcome in Japan and South
\nKorea in particular.<\/p>\n
The Japanese and South Korean authorities are deeply concerned
\nabout oil spills and the environmental devastation they can
\ncause, and South Korea has in the last year or two followed
\nJapan's example by insisting that ships that call there are
\nmodern and safe.<\/p>\n
"South Korea has had a big impact in the last year and a half.
\nThey have been demanding almost exclusively modern tonnage and
\nthat has added a lot (to demand for such ships)," a U.S. tanker
\nbroker said.<\/p>\n
Demand for crude has also been pushed up by a boom in refinery
\nbuilding in Asia in recent years. South Korean refinery capacity
\nrose 11 percent last year from 1995 and is now the biggest
\nrefining center in Asia after Japan.<\/p>\n
Freight rates have also been boosted by seasonal factors as
\nboth North America and Japan and South Korea stock up ahead of
\nthe winter, analysts said.<\/p>\n
VLCC rates from the Middle East to Japan on Wednesday hit
\nWorldscale 100 for the first time since the Gulf War and for only
\nthe second time since the 1973 oil crisis, they added.<\/p>\n
Worldscale rates express tanker freight rates as a percentage
\nof a set level, which in the case of Middle East\/Japan voyages is
\n$11.93 per ton.<\/p>\n
Brokers said orders for new ships were high, and in the longer
\nterm this could push rates down as more modern vessels came onto
\nthe market.<\/p>\n
But several brokers felt that the market was likely to
\nmaintain its strength for now, after three VLCCs had been fixed
\nat Worldscale 100 to Japan.<\/p>\n
"The strength could stay for a couple of months. People are
\noptimistic that at least rates will not go down for now," one
\nbroker said<\/p>",
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