(Bloomberg) ? Frontline Ltd., the world?s largest tanker company by capacity, may say first-quarter profit fell 32 percent as the world?s growing fleet of vessels cut freight rates.

Profit probably dropped to $190 million, or $2.50 a share, from $279.82 million, or $3.74 a share, based on the median estimate of seven analysts surveyed by Bloomberg. Frontline, based in Hamilton, Bermuda, and controlled by Norwegian billionaire John Fredriksen, is due to report today.

?Rates were somewhat lower but the market in a historical sense was still very strong,? said Rikard Vabo, an analyst at Fearnley Fonds AS in Oslo who holds a ?reduce? rating on the stock. ?Frontline has a history of performing quite well? while market conditions fluctuate, he said.

The world fleet of oil supertankers called very large crude carriers, or VLCCs, will grow 5 percent by capacity this year with the delivery of new vessels, according to London-based brokers Simpson, Spence & Young. At the same time, the International Energy Agency forecasts growth in demand for crude will slow by three percentage points from last year to 1.5 percent.

Freight rates for different-size crude-oil tankers were 3.5 percent lower on average in the first three months of 2006 compared with last year, while those for supertankers travelling between the Persian Gulf and Japan were an average 2.7 percent lower, according to the Baltic Exchange in London.

?This is not a critically falling market,? said Ole G. Stenhagen, an Olso-based analyst at Skandinavska Enskilda Banken AB. ?It?s a summer?s day in the mid-20s rather than a baking day on the Riviera. It will be more challenging next year but the short-term is good.?

The global fleet of VLCCs was made up of 474 tankers of 138.3 million deadweight tons, a measure of a ship?s capacity for carrying cargo, fuel and supplies, at the end of last year, according to Simpson, Spence & Young.

Daily production among OPEC?s 11 members averaged 29.6 million barrels of oil in the fourth quarter, according to data compiled by Bloomberg.

Revenue for supertankers operated by companies such as Frontline and New York-based Overseas Shipholding Group rose 0.8 percent to $70,300 a day in the first quarter from a year earlier, according to London-based Drewry Shipping Consultants Ltd. The figure is for transporting crude from the Middle East to Japan and is after shipowners have paid costs such as fuel and port fees.

?Frontline performed as well as last year? given the weaker market and once exceptional items are deducted from 2005?s figures, said Arne Egil Roenning, an analyst at Fondsfinans AB in Oslo who recommends selling Frontline stock.

Higher income in 2005 can mostly be accounted for by proceeds totalling $40 million 2005 from ship sales and gains from interest rates amounting to $27 million, Roenning said.

Frontline operates 44 VLCCs that can carry two million barrels of oil, and 26 suezmax tankers that can haul a million barrels each, according to the company?s website. Most of the ships are leased from Ship Finance International Inc., which Frontline spun off as a separate company in 2004.

?There is cause for concern? because many of Frontline?s ships are leased one trip at a time in what?s called the spot- market rather than on long-term contracts, making them vulnerable to price swings, according to John Kartsonas, an analyst with Citigroup Inc. in New York who recommends that clients sell the stock. ?Frontline is one of the best-operated tanker companies but its leverage in the spot market will hurt it going forward. In the third and fourth quarters they will post a loss.?

Frontline?s vessels transport oil from the Persian Gulf and other producing areas to refineries in Asia, the Americas and Europe that are owned by companies such as Irving, Texas-based Exxon Mobil Corp.

Almost one third of the company?s fleet is comprised of single-hulled ships with just one steel layer around their cargo tanks, which will no longer be permitted to sail after new regulations take effect in 2010. At least four of Frontline?s ships are being converted, either into floating storage platforms, FPSOs, or mobile oil rigs, called heavy-lifts.

Conversion is ?a pretty good way to extend their life beyond 2010 and prospects are good in both the FPSO and heavy-lift segments, with returns enough to cover the capital outlay,? said Fondsfinans? Roenning.