MARKETS TANKERS
No oil demand peak in sight BIMCO’s Peter Sand identifies what’s been driving the different tanker sectors in the first months of 2019
O
east – we know that means work for VLCCs. When it comes to VLCCs, it’s important to note 15 new units have been launched during January and February, with only one 25-year-old unit sent to the Indian sub-continent for breaking during the same period. 2019 is a year that will see the VLCC fleet grow strongly. By the end of February, that sector had already grown by 3% over the past 12 months. While limiting the upside, such strong fleet growth could not keep freight rates for VLCCs from going up and going against the general trend of crude oil tankers in February. Naturally, the new ships were not in place to fight for cargoes in the main loading areas in Arabian Gulf, West Africa and the US Gulf yet. A record high for any month at 329 VLCC spot fixtures in January (source: Clarkson) had reduced the tonnage lists to such an extent that even Chinese charterers being away during the festive season could not stop VLCC earnings from reaching $37,000 per day on the last day of
n November 4 2016, the Paris Agreement entered into force, hailed by some as a sure sign of a fast approaching stop for the burning of fossil fuels, a stop that would cause deep-rooted changes in every shipping sector. Not least the oil tanker sector. Paying more close attention to what is really happening, global oil demand continuously grows. According to the International Energy Agency (IEA), we must enter 2024 before the annual global oil demand growth falls below 1m barrels per day. China and India remain the largest single nation drivers behind this growth. In 2018, oil demand grew by 1.3m barrels when compared to 2017. Changes will also come around as demand shifts away from developed economies and transportation fuels in the west, towards Asia and petrochemicals. As global oil supply is also projected to shift, with the US accounting for more than half of the increased total oil supply in 20182024 – an opportunity for shipping may arise. If those US barrels head
Crude oil tanker fleet growth Y-o-y, previous 24 months
10%
9%
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
VLCC
Suezmax tanker
Jan. 2019
Feb. 2019
Dec. 2018
Oct. 2018
Nov. 2018
Sep. 2018
Aug. 2018
Jul. 2018
Aframax tanker
Source: BIMCO, Clarksons
ISSUE ONE 2019
Jun. 2018
Apr. 2018
May 2018
Mar. 2018
Jan. 2018
Feb. 2018
Dec. 2017
Oct. 2017
Nov. 2017
Sep. 2017
Jul. 2017
Aug. 2017
Jun. 2017
Apr. 2017
May 2017
Feb. 2017
Mar. 2017
Growth rate
11%
10%
Growth rate
11%
Total fleet growth
February, up from $14,000 per day on the first of that month. In the meantime, in the oil product tanker sector, freight rates for all sizes were back at loss-making levels by March 8. The positive knock-on effects from the falling oil prices back in October 2018 did deliver profits in December through most of February. Looking forward, it will all be a matter of when the positive knock-on effects from IMO 2020 start to kick in – as they will eventually do – one way or the other. The extent of which is still almost as uncertain as the rest of the oil tanker market prospects for the near to mid-term. It’s important to note that large-scale worldwide refinery maintenance is just about done, meaning May and June will help the oil product tanker sector as increased production needs distribution. The high level of refinery maintenance in January through to April in Europe and North America has already lowered the level of oil products output significantly. During March and April, Asian and Middle Eastern refiners are going offline too for maintenance. The second half of the year should prove more interesting rates-wise. ●
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