SINGAPORE: Freight rates for very large crude carriers (VLCCs) are set to rise further as Asian refiners rebuild inventories after plants were reactivated following maintenance outages, brokers said on Friday.

However, gains are likely to be capped due to the availability of additional ship capacity and charterers’ holding back cargoes if they think rates are too frothy, broker added.

“Worldscale 70 of West Africa is on the cards, with W60 out of the Middle East,” said a European supertanker broker on Friday.

Rates on both trade routes have climbed by about 10 Worldscale points in the previous week.

Owners of modern ships that cater to West Africa cargoes are likely to see higher rates because charterers have a tougher vessel approval regime than ships that are slotted for the Middle East crude cargoes.

“What happens from the Middle East is that charterers take in older ships and those straight from dry dock,” the broker said.

This means charterers have more vessels to opt from, while owners also increase vessel speeds, which shorten the duration of the voyage and helps increase ship capacity, curbing a further increase in rates.

That’s in the realm of the long shot,” said Ashok Sharma, managing director of ship broker BRS Baxi in Singapore.

At present, VLCC rates for the Middle East-to-Asia route are around W56 or $21,000 per day. That compared with around $14,960 per day on March 24, the lowest since Sept. 27.

“Rates have come up from covering opex to breakeven levels,” Sharma said.

“Rates from West Africa are coming up. On the back of that, rates from the Middle East are following through,” Sharma added.

Around 110 VLCC cargoes from the Middle East have been fixed for April loading with around 10-20 cargoes still to be confirmed, brokers said.

“This shows that basic underlying demand for oil is still there. This will continue - inventories will have to be replenished,” Sharma said.

China continues to be the main oil buying driver, brokers said.—Reuters