General Maritime leads slump as U.S. oil-tanker stocks plunge

Bloomberg News

General Maritime Corp. led declines by oil-tanker stocks in New York as the threat of a second U.S. recession in three years increased the risk energy imports into the world’s largest economy may fall.

General Maritime fell as much as 32 percent in New York Stock Exchange trading and was down 23 percent at 57 cents as of 12:18 p.m. local time. The six-member Bloomberg Tanker Index fell as much as 8.1 percent, the most since May 2010, to the lowest level in more than eight years.

“The stock market is discounting problems ahead,” Andreas Vergottis, research director at Tufton Oceanic Ltd., manager of the world’s biggest shipping hedge fund, said by phone. “It will be very bad for tankers.”

The U.S. economy is heading into a “double-dip” recession, Nouriel Roubini, the co-founder and chairman of New York-based Roubini Global Economics LLC, said in an interview on Bloomberg Television.

Tanker shares retreated as equities slumped globally. The Standard & Poor’s 500 Index was last down 3.8 percent to 1,153.47, its lowest level since October. The MSCI World Index slid 3.5 percent, extending its drop from this year’s high to 18 percent.

A return to recession in the U.S. would delay any rebound in charter rates for tankers until after 2013, said Jonathan Chappell, an analyst at Evercore Partners Inc. in New York. Hire costs for very large crude carriers, each able to haul 2 million barrels of oil, are at the lowest level in 10 years, according to the analyst.

34% Decline

“What this could do is delay the recovery out further,” Chappell said.

Hire costs on the industry’s benchmark Saudi Arabia-to- Japan route fell 1.7 percent to 46.09 industry-standard Worldscale points today, according to the Baltic Exchange in London. The decline was the 12th in a row. Rental rates are down 34 percent this year.

Seaborne shipments of oil into the U.S. were forecast to reach 6.9 million barrels a day, or 17 percent of all crude shipped this year, an 11-year low, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. The country is the world’s biggest oil importer.

Owners are facing a glut of ships after ordering the most in almost three decades in 2007 and 2008 before the world economy entered its worst recession since World War II. Supply and demand in the tanker market probably would only return to balance later than 2013 if demand were to weaken further, Chappell said.

Negative Rates

Average quarterly rates for VLCCs carrying crude to the U.S. from the Middle East have been unprofitable since October, according to data from the exchange. It assesses freight costs on more than 50 international maritime routes.

Unprofitable, or negative, rates mean tanker owners effectively are paying some of charterers’ costs because agreed daily hire rates fail to cover all fuel and operating expenses for a journey.

Tankers will ship an estimated 40.9 million barrels of crude oil, Clarkson said.

“Trade will slow down, and I wouldn’t be surprised if we see negative growth,” Tufton’s Vergottis said.