- Daily earnings slumped to the lowest since at least 2017.
- Rates hit by OPEC production cuts and an oversupply of vessels.
Supertanker’s loss deepened to $6,779 a day amid OPEC cuts, writes Alex Longley for an article published in Bloomberg.
What is the reason?
With too many vessels to haul fuel, losses for supertankers on a benchmark Middle East-to-China route deepened to $6,779 a day on Tuesday.
Weakest earnings
That’s the weakest earnings since at least 2017 and effectively means vessel owners would be subsidizing the transport of oil on that route.
Loss on benchmark route
Losses on the benchmark route have deepened as OPEC+ extended output cuts. Tanker rates have been hit by a host of factors.
Firstly, the Organization of Petroleum Exporting Countries and its allies are withholding near-record amounts of oil and surprised the market last week by extending that strategy into April.
There’s also an oversupply of ships, which has been compounded by the unwinding of volumes of crude stored at sea. For much of last year, those volumes kept tankers off the market and sent daily earnings soaring.
OPEC’s decision
“The decision from OPEC to extend the production cuts certainly did not do the short-term market any favors as volumes will continue to underwhelm,” Fearnley Securities analysts including Espen Fjermestad wrote in a report.
Unprofitable cargoes?
Still, there’s logic to owners taking unprofitable cargoes. Oil tankers receive so-called approvals from the companies that hire them. So if a ship spends a long time without being chartered, those approvals can be jeopardized.
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Source : Bloomberg
