[BITList] Oil in the tank - er

[John Feltham]

Begin forwarded message:







Here is an intriguing story - the headline makes the situation sound  
catastrophic (and maybe it is).  But, we're talking about canceling 6  
(yes, S-I-X) tankers.

The other intriguing part of the story is that tankers are being used  
to store oil -- and at $50K per day, that suggests there is no  
shortage of oil.

Shouldn't the price of oil be around $19/bbl?  Meanwhile, the Saudi  
King says that a "fair" price is $75-80 (actually, he said the world  
economy can handle that price).

Guess, might as well bite the bullet and buy Exxon, Chevron and BP.





Third of Oil-Tanker Orders at Risk, Frontline Says (Update1)
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By Alaric Nightingale

May 28 (Bloomberg) -- Frontline Ltd., the world’s largest operator of  
supertankers, said as many as a third of the industry’s record orders  
for new oil carriers may be delayed or canceled after a slump in  
rental rates.

The Hamilton, Bermuda-based company said today it canceled $556  
million of orders for two supertankers and four suezmaxes, equal to a  
third of its orders. Similar moves by other shipping lines may “emerge  
in the next few weeks,” Jens Martin Jensen, chief executive officer of  
its management unit, said by phone.

That shows other owners “might be able to do something” to curtail  
their own orders, Anders Karlsen, an analyst at Nordea Markets in  
Oslo, said by phone. Frontline is the first publicly traded company to  
say it canceled orders for oil tankers, he said.

Benchmark supertanker rates plunged 88 percent from their peak in July  
as oil producers curbed supply and ship owners expanded the global  
fleet. The Paris-based International Energy Agency expects the first  
back-to-back drop in global annual oil demand since 1983.

The benchmark rental rate for supertankers, based on Saudi Arabian  
shipments to Japan, averaged 47.29 Worldscale points in the first  
quarter, the lowest since the third quarter of 2002. Worldscale points  
are a percentage of a nominal rate, or flat rate, for more than  
320,000 specific routes. The rate was at 28.53 yesterday, compared  
with a peak of 244.53 on July 1.

Oil Tankers

Overseas Shipholding Group Inc., the largest U.S. operator of oil  
tankers, predicted “orderbook destruction” on May 4 because of a lack  
of financing and slumping rental rates.

Global orders for new oil tankers reached a record 1,674 vessels in  
June 2008, according to data from Oslo-based Fearnley Consultants A/S.  
By capacity, the order book in the 1970s was larger because the  
vessels ordered were bigger. Crude oil traded in New York has dropped  
57 percent since reaching a record $147.27 a barrel in July.

Frontline rose as much as 17 kroner to 164 kroner in Oslo trading, the  
biggest intraday gain since May 4. The company also reported today  
that net income dropped to $76.6 million in the first quarter, or 98  
cents a share, from $221 million, or $2.95, a year earlier. That beat  
the median estimate of $48.9 million in a Bloomberg News survey of  
eight analysts.

The cancellation of Frontline’s orders “substantially” reduces the  
likelihood the company will need to sell shares, Karlsen said.

The shipping line’s largest vessels earned an average of $50,300 a day  
in the first quarter. That’s 40 percent more than shipments from the  
Middle East to Asia and the U.S., which earned an average of $35,804 a  
day, according to data from the London-based Baltic Exchange.

Supertankers are now so cheap to rent that some traders are using them  
to store crude. There are 55 to 60 supertankers storing oil, according  
to Frontline. Jensen said April 23 there were about 45.



Last Updated: May 28, 2009 05:49 EDT



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