Cantor Fitzgerald

Cantor Fitzgerald Comments: Mideast Crude Tanker Rates Rally To One-Month High

August 16, 2010, Reuters UK

* Tanker owners withholding VLCCs, market stabilising

* Cross med market boosted by firmer cargo enquiry

Crude oil freight rates on major routes were mixed on Monday with the Middle East Gulf market hitting its highest in a month due to better cargo activity and tighter vessel availability as owners held back ships.

The world's benchmark Very Large Crude Carrier (VLCC) export route from the Middle East Gulf to Japan DFRT-ME-JAP was at W60.30 or $21,809 a day, up from W47.14 or $6,185 a day last week and at the highest since mid July.

"There's an eerie feeling of relief that the worst may be over creeping into the VLCC market," broker P.F. Bassoe said.

"Owners had become increasingly stubborn in holding tonnage off the market as rates tumbled in recent weeks and have been rewarded with an uptick in activity."

Middle East VLCC rates slid to their lowest since November earlier this month as softer enquiry and a build up of vessels weighed on sentiment. It had prompted tanker operators to anchor their vessels as rates fell below operating costs.

"VLCC rates in the Arabian Gulf have rebounded from cash costs, firming to $20,000/day on accelerated activity over the past several days," Dahlman Rose & Co said in a report.

"Although OPEC sailings are expected to decline in the next two weeks, reflecting a slower period of fixture activity, we expect seasonal trends to continue and for the tanker market to reach substantially higher levels in 4Q10 compared to the past several weeks."

VLCC rates from the Gulf to the United States DFRT-ME-USG were at W44.33 from W39.25.

"A healthy amount of fixing in the Middle East Gulf helped to thin the list of available tonnage, we suggest," Cantor Fitzgerald said.

Brokers and analysts said further fixing activity was needed to sustain the upward momentum.|

Rates for smaller aframax tankers from the Caribbean to the U.S. Gulf coast were fell to W112.73 from W117.27 last week.

VLCC rates from West Africa to the U.S. Gulf were at W59.69 from W56.73 last week.

Baltic Exchange figures showed crude oil tanker rates from the Black Sea to the Mediterranean were at W90.63 from W91.46 last week.

Cross Mediterranean tanker rates were at W139.55 from W102.05. Brokers said a flurry of cargo enquiries helped drive gains.