Oil tanker rates expected to rise

LONDON - Oil tanker rates, which usually fall in the second quarter, may climb in the next three months as Opec boosts production to meet demand from the US and China.

Revenue, minus costs such as fuel and port fees, will probably average US$70,000 a day for 2 million-barrel ships on the round trip to Japan from the Middle East, based on the median estimate of nine analysts surveyed by Bloomberg last month.

Average revenue was US$65,000 in both the first quarter and a year earlier, according to Oslo-based shipbroker PF Bassoe.

"Growth in China seems to be eliminating the seasonal patterns in oil demand," said Nigel Prentis, director of research at HSBC Shipping Services in London. Profits for shipowners, such as Bermuda-based Frontline, Bahamas-based Teekay Shipping Corp and New York-based Overseas Shipholding Group, may "challenge the records of 2004," he said.

"We believe oil demand will grow close to 3 per cent this year," Oscar Spieler, chief executive officer of Frontline's operations unit, which runs 35 tankers that can carry 2 million barrels apiece, said. "You can probably multiply that by two to get tanker demand growth."

The International Energy Agency in Paris on March 11 raised its forecast for world oil demand for a third consecutive month to 84.3 million barrels a day, 330,000 more than previously expected.

The Bloomberg Tanker Index, led by Frontline, rose 82 per cent in 2004, the third-best performance of 480 industry indexes ranked by Bloomberg.

Freight rates surged to all-time highs last year.

- BLOOMBERG