LONDON (Bloomberg) - Supertanker owners are facing the longest stretch of unprofitable rates in 17 years as the supply of new vessels increases nine times faster than demand for oil.

Shipping companies are making $3,155 a day for a single voyage, 90 percent below the $30,900 Frontline Ltd., the biggest operator, says it needs to break even. Morgan Stanley estimates the tanker fleet will expand almost 13 percent next year and the International Energy Agency says oil use will grow 1.4 percent.

Ships ordered before rates plunged from $177,036 in July 2008 are swelling the fleet of about 526 supertankers. Owners have responded by cutting average speeds nine percent since March and anchoring 24 percent more vessels since January, ship- tracking data compiled by Bloomberg show. John Fredriksen, the chairman of Frontline, said last month there "won't be much money to earn" in shipping in the next two to three years.

"Investing in tankers right now is a bad idea," said Pablo Mastragostino, a broker at Riverlake Shipping SA in Geneva. "When people say oil-consumption has increased by some tiny amount, I laugh. It corresponds to a minuscule amount of extra ships, and there's far more coming out of the yards."

The global oil-tanker fleet will expand by 86.5 million deadweight tons in the next two years, equal to about 27 percent of existing capacity, Morgan Stanley estimates. The extra ships, being built by yards including Shanghai Waigaoqiao Shipbuilding Co. and Dalian Shipbuilding Industry Co., would exceed the previous record of 79.8 million deadweight tons set in 1974 and 1975, according to the research unit of Clarkson plc, the world's largest shipbroker.

Forward freight agreements traded by brokers and used to speculate or hedge are trading no higher than $28,285 through 2012, data from Imarex ASA show. Single-voyage daily rates slumped 92 percent to $3,155 this year, according to data from the Baltic Exchange.

Six of eight shipbrokers and owners surveyed by Bloomberg say unprofitable rates for supertankers, each bigger than the Chrysler Building, will last at least two years.

That would be the longest losing stretch since one that ended in 1995, when the fleet also had too many ship orders, according to Martin Stopford, a director at Clarkson and author of "Maritime Economics", now in its third edition.

Freight derivatives and brokers have proved wrong about previous slumps. In June, derivatives were pricing in a third- quarter average of $44,944 when the price turned out to be $13,526. Second-quarter hire costs were forecast at $28,758 in an April survey by Bloomberg of 13 analysts, traders and shipbrokers. They traded 71 percent higher.

Part of the explanation lies in price swings. Rates moved 20 percent or more in seven of the last eight quarters, according to data from the London-based Baltic Exchange. The S&P GSCI Spot Index of 24 commodities last moved more than 20 percent in the second quarter of 2009 while the MSCI World Index of stocks did it once in the last decade.

"At these very low rates, I doubt many owners will continue to run the service of delivering crude," said Hugo De Stoop, chief financial officer of Euronav NV, an Antwerp, Belgium-based tanker operator. "Normally the winter should trigger an uptick in rates."

Most owners lease vessels in the single-voyage market, or for longer-term accords, some of which remain profitable. While one-year contracts are trading at a daily rate of $30,000, five- year charters are at $39,000, London-based Clarkson estimates.

"I'm sure there will be small spikes soon, but they will only lift the market to levels that are still difficult for owners," said Martin Sommerseth Jaer, an analyst at Arctic Securities ASA in Oslo.

The collapse in rates encourages owners to delay and cancel orders. Missed deliveries ran at about 30 percent in the past two years, said Axel Styrman, an analyst at Carnegie ASA in Oslo. The fleet expansion may also diminish as ships with single hulls get scrapped, he said. Companies are phasing out the vessels which are "more accident prone," according to the European Union.

"Everything is not doom and gloom," said Jens Martin Jensen, CEO of Frontline's management unit. The order book is "relatively large, but I don't think it will be of the magnitude we see on paper".

Even if fleet growth falls short of forecasts, shipowners will still have to contend with a slowing economy. Global growth will drop to 4.2 percent in 2011, from 4.8 percent this year, the International Monetary Fund said October 6. The US, the world's biggest oil consumer, will expand 2.5 percent, from 2.7 percent in 2010, according to the median estimate of as many as 74 economists surveyed by Bloomberg.

World trade may also be slowing. An index compiled by the Hamburg Shipbrokers' Association reflecting rates for six types of container ships fell for four consecutive weeks through October 22, the longest losing streak in almost a year.

Equity analysts' estimates for next year will probably have to be cut, Pareto Securities AS analysts led by Martin Korsvold in Oslo said in a report October 20. The team reduced its 2010 earnings estimates on 11 tanker companies.

Shares of Bermuda-based Frontline, rated "buy" or "hold" by 19 of 26 analysts tracked by Bloomberg, fell 5.4 percent in Oslo trading this year. While the mean estimate for the company's 2010 earnings per share dropped to $2.68 from as much as $3.26 in August, that is still twice last year's profit, data compiled by Bloomberg from 20 analyst forecasts show.

Overseas Shipholding Group Inc., the biggest US tanker operator, is rated "buy" or "hold" by 15 of 18 analysts tracked by Bloomberg. Shares of the New York-based company fell 24 percent this year in New York. Euronav reported a third- quarter loss on October 19 and said it was "cautious" about 2011.

Euronav anchored some of its suezmaxes, which have half the capacity of supertankers, in the third quarter because rates were too low, the company said on October 19. Frontline's Mr. Jensen told investors in August that he was shunning some business because it made more sense to anchor ships, cut speeds and let the crew "do some fishing".

The fleet was swollen this year by the return of vessels that had been used to store oil or refined products. Banks, oil companies and traders used record numbers of ships in the final months of 2009 to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, SSY Consultancy & Research Ltd. said at the time. The trade was profitable so long as the difference between energy contracts exceeded the cost of storage, insurance and financing.

The spread between the first and sixth Brent oil contracts traded on the London-based ICE Futures Europe narrowed to an average of $1.93 a barrel in the third quarter, from $5.48 at the start of 2009, spurring traders to remove almost all the fuel stored at sea and returning ships to compete for business. The spread has narrowed to $1.81 so far this quarter.

"It doesn't look good over the next few years," said Glenn Lodden, an Oslo-based analyst at DnB NOR Markets, which has "sell" ratings on Frontline, Overseas Shipholding and Euronav. "We're not expecting any significant tightening of the market any time soon."