Analyst forecasts decline in tanker rates

By OGJ editors
HOUSTON, Apr. 5 -- Tanker rates had a robust first quarter but are expected to decline in 2007-08 because the worldwide tanker fleet will grow faster than analysts had originally assumed, said Simmons & Co. International.

In the short term, tanker rate support will come from Nigerian crude oil supply disruptions and from changing fuel specifications in the US, analyst Ruairidh Stewart said in a Mar. 24 report.

"It is our view that outages in Nigeria bode well for relative strength in VLCC [very large crude carrier] rates as Middle East tonnage replaces West African volumes (primarily a Suezmax trade)," Stewart said.

Stewart said China's entry into the tanker-building market will reduce asset prices through 2007-08. He expects a decline of 15%/year for 2 years.

"An unsustainably high level of ordering activity in the tanker market" happened during the first quarter, he said, forecasting that tanker orders will slow "as existing yards grow wary at emerging Chinese capacity."

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