The cost of shipping Middle East crude oil to Asia, the world's busiest route for tankers, fell for a fourth session in London because of a surplus of vessels competing for cargoes. Charter costs for very large crude carriers (VLCCs) on the benchmark Saudi Arabia-to-Japan route declined 0.7 percent to 49.24 Worldscale points, according to the Baltic Exchange in London Wednesday. Rental income from the route slid 45 percent to $659 a day, the lowest level since May 6. "The demand side has been pretty robust all year, but the supply side of this market is just horrific," Will Leslie, London-based head of freight derivatives at ACM-GFI, a broker of the contracts, said. "There are quite simply too many VLCCs competing for each cargo." Demand for the vessels will expand 2.8 percent this year, about a third of the fleet's estimated 8.7 per cent growth, according to Clarkson Research Services Ltd, a unit of the biggest shipbroker. Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in US dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates. The Baltic Dirty Tanker Index, an overall measure of shipping crude that includes vessels smaller than VLCCs, declined 0.1 percent to 725 points, according to the exchange. Meanwhile, the state-owned Kuwait Oil Tanker Co. (KOTC) plans to build nine new vessels, including two giant crude tankers, at a cost of $600 million, its chairman said in comments published Tuesday. Abdullah Al-Roumi told Al-Qabas daily that the new vessels will add to the company's current fleet of 24 tankers, which includes transport petroleum products, crude and liquefied petroleum gas (LPG). Separately, Taiwan's Formosa Petrochemical Corp. will continue to lift August term crude supply from Saudi Arabia and Kuwait as normal even though it had to shut its refinery in Mailiao, a source close to the company said Monday. The plant was shut on government orders for safety checks following the fire. The company is looking for tankers to store its crude, but could resell Middle Eastern grades such as Oman and Basra Light that it bought from the spot market, a trade source said. "The real challenge is knowing how long they have to stay shut," he said. Formosa shut its 540,000 barrels-per-day (bpd) refinery in Mailiao after a weekend fire at a secondary unit, a spokesman said earlier.
