Tri-Angling for Earnings

Freight rates for the Arabian Gulf – US Gulf VLCC voyage have averaged less than Worldscale WS 37 year to date, equating to negative time charter equivalent earnings when calculated at full speed on a round trip basis. As discussed last week, increased Asian demand and diversification of crude oil sources have created more VLCC cargo opportunities in the Atlantic Basin. Additionally, tanker owners in the spot market have pushed for lower voyage speeds as a result of the high bunker price environment. While it is the convention of the industry to calculate earnings on a round trip basis, in practice the dynamic nature of the tanker market does not lend itself to such tidy calculations. On that basis, charterers may suspect that actual vessel utilization is yielding a much higher return than what is being reported by various sources. But even under ideal utilization conditions, earnings are still likely below most owners’ vessel operating expenses. Download here