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Nov. 27 (Bloomberg) -- Frontline Ltd., the world's largest operator of supertankers, posted its first quarterly loss in seven years on slumping demand and said it plans to eliminate single-hull carriers from its fleet by the end of next year.

The net loss was $5.6 million, or 7 cents a share, after a profit of $107.8 million, or $1.39, a year earlier, Hamilton, Bermuda-based Frontline said today in a statement. That missed the median estimate of seven analysts surveyed by Bloomberg for a loss of 4 cents a share. The line may cut its "exposure" to vessels under construction by $198 million, it said.

Frontline will "phase out" single-hull supertankers by the end of next year, Jens Martin Jensen, chief executive officer of the company's management unit, said by phone today. International Maritime Organization rules will impose trading restrictions on single-hull carriers next year.

Shipping rates will be "pushed in a positive direction" by the scrapping of about 12 percent of the fleet that are fitted with single hulls, Frontline said in the statement. The company expects to return to profit in the fourth quarter.

The shipper joins rivals including New York-based Overseas Shipholding Group Inc., the biggest U.S.-based owner, and Antwerp-based Euronav NV in reporting net losses. Frontline has declined 26 percent in Oslo trading this year, valuing the company at 11.5 billion kroner ($2 billion).

The result shows "market fundamentals are still weak," Ana Solovjova, an analyst at Orion Securities in Vilnius, Lithuania, who recommends selling the shares, said by e-mail.

Slow Boats

Owners are responding to the downturn by sailing their carriers slower, with the average very large crude carrier, or VLCC, sailing at between 12 and 12.5 knots, compared with 13.5 to 14 knots under normal market conditions, Jensen said by phone. The action effectively reduces fleet supply.

The Organization of Petroleum Exporting Countries pumped an average of 28.5 million barrels in the third quarter, or 12 percent less than a year earlier, Bloomberg estimates show. The carrying capacity of the fleet of in-service supertankers averaged 156.9 million deadweight tons, or 8.7 percent more than a year ago.

Global oil demand fell 0.9 percent to 85.1 million barrels a day in the second quarter, according to the Paris-based International Energy Agency. Demand will climb 1.6 percent to 86.2 million barrels a day next year, according to the adviser.

The Baltic Dirty Tanker Index, an overall measure of crude- oil shipping costs, including rates for tankers smaller than those managed by Frontline, averaged 505 points in the quarter, the lowest since at least the fourth quarter of 2001, according to the London-based Baltic Exchange.

Oil Demand

Frontline's very large crude carriers, or VLCCs, earned $32,100 a day, its 1 million-barrel carrying suezmaxes made $15,900 a day. They need $32,900 and $27,100 a day to break even, it said.

On the benchmark route for supertankers that deliver 2 million-barrel cargoes of Saudi Arabian crude to Japan, earnings averaged $10,267 a day, according to the exchange.

Frontline, which said it already cut exposure to new-build ships by $36 million, has an "option" to cancel two orders for vessels that are due to be built, Jensen said in the interview.

"The big question with Frontline is whether they need additional finance to get through their new-build program," Martin Sommerseth Jaer, an analyst at Arctic Securities in Oslo, said today. "The immediate risk seems to be slightly lower."