Bahri expects VLCC rates to improve slightly in Q4

The National Shipping Company of Saudi Arabia (Bahri) expects rates of very large crude carriers (VLCCs) to stabilize at slightly better levels in Q4 2017, Reuters reported on Thursday, citing Hisham Al-Nughaimish, vice president for commercial and operations of its oil unit.

The VLCC market has been under pressure recently from higher supply of new vessels, while older vessels have not left the market in large numbers.

Meanwhile, rates of shipping fuel or bunker – which tracks crude prices – are also likely to hover around the current levels for the remainder of 2017, despite a possible impact in the short term by Hurricane Irma on oil prices, Nughaimish said.

Bahri, the world’s largest owner and operator of VLCCs, aims to increase its share of lifting from other global hubs going forward, while also boosting Saudi volumes.

Accordingly, the company has ordered 10 new VLCCs from South Korea’s Hyundai Samho Heavy Industries (HSHI). It has received four so far this year, while another one will be delivered by the end of this year.

The remaining five will be delivered by mid-2018, raising Bahri’s total fleet to 46 VLCCs, Nughaimish added.

Bahri posted a 52 percent slump in H1 2017 net profit to SAR 532.7 million, attributed to lower spot market rates in general and for oil transportation in particular. 

In a report in July, Al Rajhi Capital noted that the oil shipper is facing multiple headwinds, including depressed tanker rates due to an oversupply of tankers, and lower chartering activity in the VLCC segment.

The brokerage said it expects tanker rates to bottom out in 2017, and factors in 6 percent CAGR in tanker rates over 2017-2020.

“Depressed tanker rates should accelerate the scrapping of older vessels in our view, helping the tanker rates recover; however we stay cautious and do not factor in strong upsides to tanker rates form 2018 as the prices of new-builds are falling,” the report added.