Chartering a Tanker

Somebody has to hire the ship. Every wet cargo that moves by sea sits on that question, and the sales terms, FOB, CFR, CIF, delivered, are really just the industry's standard answers to it: who charters, who insures, and where the risk changes hands. This page is the chartering side of the trade in working detail: the kinds of charter, how a fixture actually gets negotiated today, how tanker freight is priced, and what the Incoterms commit each side to. The marine logistics guide picks up where this one ends, with the voyage itself: laycan, laytime, and the demurrage clock.

Four ways to hire a ship

The voyage charter is the trader's tool: one vessel, one cargo, one trip from load range to discharge range, with the owner running the ship, crewing it, and paying its fuel, and the charterer paying freight and living by the laytime clock. A contract of affreightment (COA) strings voyages together, a commitment to move so many tons over a period with vessels the owner nominates, the structure for steady lanes like a monthly products run. A time charter hands the charterer commercial control for months or years: you direct where she goes, you pay hire by the day plus bunkers and port costs, the owner still crews and maintains; it's the tool for programs big enough to keep a ship busy. Bareboat, where the charterer takes the ship and crews it too, is effectively becoming a shipowner and stays the province of operators and financiers. Cargo traders live in the first two, and everything below is written for them.

The fleet: which ships carry what

Tankers are not interchangeable buckets. The crude fleet and the clean products fleet are separate populations, because switching a ship from dirty to clean service means a multi-cargo cleaning cycle that costs time and money and is rarely worth it, so a vessel spends years on one side of the line. Chemical parcels, LPG, and LNG ride their own specialized fleets entirely. What each class realistically carries:

This table is also a lie detector. A VLCC full of diesel is not a cargo that exists in the normal market: VLCCs live in crude service, and outside a newbuild's maiden voyage or a rare market inversion, nobody cleans one up to haul clean products. Offers built on the wrong ship for the product, or on garbled class names (the "BLCC" of many a scam letter), announce themselves in the first paragraph. Real diesel moves in MRs and LRs; real gasoline in MRs; real crude in Aframaxes and up; and a counterparty who has actually chartered before gets this right without trying.

The fixture: how it actually gets done

It starts with a cargo brief: product and quantity with tolerance, clean or dirty (product tankers and crude carriers are separate fleets with separate cleaning realities), load and discharge ranges, and the laycan window the cargo needs. That brief goes to a shipbroker, because tanker chartering still runs on broker networks rather than public platforms: brokers circulate the cargo to owners with open tonnage, offers come back, and the negotiation runs offer against counter on rate, laytime hours, demurrage, and terms. Agreement lands the fixture "on subjects": conditionally done, pending named subjects such as stem confirmation (the cargo actually being available), suppliers' and receivers' approvals, and management sign-off. Subjects lift, and the deal is fixed, memorialized first in the fixture recap, the email summary both sides treat as binding, and then on a charter party form the industry has argued over for decades, ASBATANKVOY and the oil-major forms being the tanker standards, amended by the negotiated rider clauses. The recap discipline matters: every later argument about laytime or terms goes back to that document, so it gets read like the contract it is.

Vetting, both directions

Between "on subs" and loading, both sides inspect each other. The charterer vets the ship, and the machinery is standardized: the SIRE inspection regime run under the oil majors' umbrella, the Q88 questionnaire that describes the vessel in exhaustive detail, age and class records, P&I cover, physical compatibility with the terminals (draft, length, manifolds), and, non-negotiably in the modern trade, sanctions screening of the vessel, its owners, and its history, the same diligence culture that governs the cargo. The owner vets back: the charterer's credit for freight and demurrage, the cargo's legality and origin, references from prior fixtures. Terminals then vet the ship again for their own berth. None of this is bureaucratic decoration; unvetted ships don't get berths, and unvetted charterers don't get ships.

Worldscale: the market's own language

Tanker freight for crude and larger product cargoes is quoted in Worldscale, a system that confuses everyone exactly once. Each year the Worldscale association publishes flat rates, a dollars-per-ton cost for a standardized vessel on thousands of route combinations, and the market then negotiates in percentage points of flat: WS100 is the published rate, WS80 is eighty percent of it, WS150 is one and a half times, and the points move daily with vessel supply the way any freight market moves. The system exists so a rate negotiated for "Caribbean to US Gulf" flexes automatically across whichever exact ports the voyage ends up using. Smaller parcels, barges, and regional trades skip the apparatus and fix as lump sums or dollars per ton. Riding alongside freight in every negotiation is the demurrage rate, dollars per day if the charterer's terminals overrun the allowed laytime, and a chartering desk prices that exposure as carefully as the freight, because the clock does not negotiate afterward.

FOB, CFR, CIF, delivered: who does all this

Now the sales terms make sense, because each one assigns the chartering job. The table is short:

The detail everyone misses on first contact: under CFR and CIF the seller arranges and pays for the voyage, but risk still transfers at the load port, the moment the cargo is on board. The seller is organizing a voyage the buyer is already at risk on, which is why CIF obliges the seller to hand over marine insurance, conventionally minimum cover at 110 percent of value, naming the buyer's interest. In wet-barrel practice the contract sharpens the edges: title and risk defined at the load port flange, quantity and quality set by independent inspection at that moment, the bill of lading carrying title into the letter of credit. Today's market runs on the whole menu: majors and traders with chartering desks buy FOB to control freight and timing; buyers without one pay for CFR, CIF, or fully delivered terms and let the seller's desk do this page's work; and the choice is honestly priced, since a seller quoting delivered has simply added the freight, insurance, and demurrage risk to the number.

Tons, barrels, and API: the arithmetic

Ships think in metric tons, trade thinks in barrels, and the bridge between them runs through density. The conversion comes off the crude's API gravity: specific gravity equals 141.5 divided by (131.5 plus API), and barrels per metric ton equals 6.2898 divided by that specific gravity. Lighter product means more barrels in every ton, and the swing is big enough to move money:

Worked examples: an MR loading 47,000 tons of diesel carries about 47,000 times 7.45, roughly 350,000 barrels. An Aframax with 95,000 tons of 33 API crude carries about 696,000 barrels. Flip it around and the same 700,000 barrels of 16 API heavy crude weighs about 106,000 tons, more ship for the same barrel count, which is why heavy grades and vessel nominations have to be matched, not assumed. Contracts pin the basis, net barrels at 60 degrees F on the US side, and the arithmetic is also a one-line fraud check: an offer quoting a million tons of diesel as six million barrels has done the math wrong for its own product, and real sellers do not get their own cargo arithmetic wrong.

The smell test: offers that fail physics

The fake-cargo world loves big round numbers, and the fastest way to kill them is to make the number physical. Take the classic "100 million barrels" offer. As ships: that is fifty VLCC cargoes, against a worldwide VLCC fleet of roughly nine hundred, most of which are laden or committed at any moment; fixing fifty of them would bend the printed freight market and every broker on earth would know the charterer's name by Friday. As storage: the entire tank farm at Cushing, the largest commercial hub in America, holds less than 100 million barrels of shell capacity, and the US Strategic Petroleum Reserve, built by a government over decades, holds about 700 million; no private seller has a hundred million barrels of anything sitting unsold. As product: 100 million barrels of diesel is on the order of four days of the entire world's diesel consumption. The offer is not ambitious; it is impossible, and impossibility is the diagnosis.

Ports fail these offers just as fast. A laden VLCC draws around 20 meters of water, and only a short list of deepwater and offshore terminals on earth can load one; in the US Gulf, VLCCs are mostly loaded offshore by ship-to-ship transfer or at the one offshore terminal built for the purpose, because no Texas ship channel floats one fully laden. So an offer of "2 million barrels FOB Houston, one vessel" has failed on draft before the price is discussed. The realistic market, for calibration: product cargoes trade in the 150,000 to 700,000 barrel range on MRs and LRs, crude cargoes from 500,000 to 2 million on Aframaxes through VLCCs, and term supply means a cargo or a few per month, not mountains. The screen that follows from all of this is short: a named load terminal whose ships and drafts fit the story, storage that can be verified by tank receipts and inspection, a vessel nomination of the right class for the product, quantities that exist, and a seller who welcomes the checks, the same culture as the cargo diligence and instrument verification pages, because real cargoes survive scrutiny and fakes resist it.

Common questions

How far ahead do you fix a ship?

Spot fixtures commonly happen one to a few weeks ahead of the laycan, balancing market timing against the risk of thin tonnage lists; steady programs lock coverage further out with COAs. Fixing too early pays yesterday's market; too late pays a squeeze.

What is the fastest way to spot a fake cargo offer?

Make it physical: does the quantity fit real ships, real storage, and the named port's draft, and does the tons-to-barrels math work for the product's API? Most fakes die on one of those four questions inside five minutes, and the real lanes are sized by terminal drafts, not by ambition.

Can a first-time cargo owner realistically charter?

Yes, through a good broker, with eyes open: owners will probe credit, may want freight substantially prepaid, and the vetting file has to be in order. The alternative for early deals is buying CFR or delivered and letting the seller's desk carry it, then graduating to FOB as the shipping muscle builds.

Where Vexon fits

Vexon works both seats: chartering product parcels into Central America and the Caribbean, and structuring crude and products deals across the FOB-to-delivered menu with the vetting and documentation this page describes, on the international desk. Related reading: marine cargo logistics, crude oil basics, and letters of credit. To talk cargoes and lanes, get in touch.