Oil shipping rates expected to fall in 2006

Eric Watkins
Senior Correspondent

LOS ANGELES, Apr. 3 -- Freight rates for oil tankers will decline further in 2006 due to excess shipping capacity, analysts told delegates at Intertanko's Singapore Tanker Event.

Clarksons Research Services Managing Director Martin Stopford said rates will decline in 2006 as owners spent $20.7 billion on new ships in 2005, marking the third successive year of heavy ordering.

Stopford said supply is set to continue to grow by 6% over the next 3 years, but oil trade is expected to grow by just 1.5 million b/d/year until 2010—about 500,000 b/d less than required to meet the fleet additions.

In 2006 alone, Stopford said, there will be 12.1 million dwt of new ships over the demand balance.

RS Platou Director Erik Anderson made a similar forecast, saying the market is declining given that the peak of fourth quarter 2005 was much lower than the peak of fourth quarter 2004.

Anderson said freight rates would decline in 2006-07 as additional oil production and refining capacity would lead to demand growth of just 2-4%, while fleet growth would be higher at 5-6%.

Simon Yang, deputy director of research and development for Cosco, gave a dissenting view for very large crude carriers, saying the outlook for them is "optimistic" in 2006.

Contact Eric Watkins at hippalus@yahoo.com.

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