Freight rates for very large crude carriers (VLCCs), which fell to a near six-month low on Thursday, will remain weak until the Asian refinery maintenance season gets completed, starting April-end.
"I haven't seen a collapse in rates like this for some time. People are taking insane rates," said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.
Output cuts by oil producers, refinery maintenance in Asia and the reactivation of older vessels previously used as floating storage have combined with a raft of new tanker deliveries and ships fresh from repair yards to dampen freight rates.
"As far as demand is concerned, the next trigger is definitely refineries coming back on line," Sharma said.
More than 20 facilities in Asia-based refineries are due to restart in April or May according to Reuters refinery maintenance data.
"Regenerating stocks after refinery maintenance may happen in a big way, which would give a fillip to the tanker market," Sharma added.
Supertanker charter rates on the Middle East-to-Japan route are down to about $16,700 per day, the lowest since Sept. 27, according to freight data on the Reuters Eikon terminal.
But Norwegian ship broker Fearnley said two charters were fixed for voyages from the Middle East to Asia at under $10,000 per day.
That is below daily VLCC operating costs of around $10,200, according to accountancy firm Moore Stephens.
Breakeven costs are about $22,300 per day, top tanker owner Frontline said.
That came as oil exports from Saudi Arabia to China dropped 12.9 percent to 4.77 million tonnes in February compared with a year earlier even as the kingdom maintained its spot as China's top oil supplier, China customs data showed on Thursday.
"The lack of volumes and growing tonnage lists have gradually depleted earnings for the VLCCs," Fearnley said in a note on Wednesday.
"Despite fierce resistance and a multi-tier market, it simply has been insufficient to withstand the force of supply and demand," the Fearnley note added.
An increase in the price of North Sea crude could see several VLCCs haul oil from the West to Asia next month, trade sources said.
That could potentially increase the number of tankers available for hire later, brokers said.
VLCC rates on the Middle East-to-Japan route dropped to around 48 on the Worldscale measure on Thursday, the lowest since Oct. 4, down from about W54.75 last week.
Rates on the West Africa-to-China route fell to W54.50 on Thursday, the lowest since Oct. 5, against W62.75 last week.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia dropped to about W121 on Thursday from W138.75 the same day last week, on excess tonnage supply, a Singapore clean tanker broker said.
(Reporting by Keith Wallis; Editing by Sherry Jacob-Phillips)
