* Tanker earnings stay under pressure
* Fears for viability of some ship owners
By Jonathan Saul
LONDON, Oct 6 (Reuters) - There is growing concern that if oil tanker earnings remain at levels below operating costs it will threaten the sustainability of the industry, officials with industry association INTERTANKO said on Thursday.
The crude tanker market continues to struggle with a supply glut which has sent average daily earnings to record lows this year.
INTERTANKO, an organisation whose members own the majority of the world’s tanker fleet, said the weak rate environment was a key issue discussed this week at a meeting.
“There was a deep concern that if tanker market rates remain consistently below a ship’s operating cost for an extended period, we believe that has the potential to have very devastating consequential impacts on a number of our members,” said INTERTANKO managing director Joe Angelo.
“That has the potential to put a number of them out of business. We don’t know how many right now. We do not know if it will occur to any, but we see this potential on the horizon,” he told Reuters.
The head of Frontline , the world’s largest independent oil shipper, told Reuters last month that players in the oil tanker market were in concrete talks over consolidation.
Average earnings for very large crude carriers (VLCCs) on the benchmark Middle East Gulf to Japan route, turned negative on Aug. 1 for the first time since the Baltic Exchange started collating earnings equivalent data in 2008.
They have been in positive territory for only six sessions since then and have stayed negative since Aug. 26.
VLCC operating costs including fixed costs are estimated at around the $10,000 a day level. Average earnings are calculated less voyage costs such as bunker fuel and port fees.
Average earnings for VLCCs, which can transport up to two million barrels of oil, were -$5,700 a day on Thursday, Baltic Exchange data showed.
Average VLCC earnings had pushed above $10,000 a day from June 8 before dropping again below the key level on June 27. They have remained below $10,000 a day since then.
“If these rate levels continue for a long period, then this could lead to a situation where sustainability of the oil transportation industry is threatened,” INTERTANKO’s chairman Graham Westgarth said in a statement separately on Thursday.
“Our members operate tankers to the highest standards and will continue to do so. Operating for a prolonged period in an environment where tanker owners are not even covering their operating costs is obviously not a situation that can be maintained.”
Investment bank Dahlman Rose & Co said it expects OPEC to curtail oil production in the coming months which is likely to keep an already-depressed tanker market under pressure through 2012. It cut Frontline Ltd and Overseas Shipholding Group Inc to “sell” from “hold”. (Editing by James Jukwey)