After a long time in the doldrums, the tanker market is primed for better days, as a result of a projected increase in ton-mile demand and various factors coming into play, from the sanctions on Iran, to the US-China trade war. Meanwhile, the product tanker market could also stand to benefit in the medium-term, as a result of the looming IMO 2020 rules and a series of changes of consumption habits in Asian countries. In its latest weekly report, shipbroker Gibson said that “oil prices had been on an upward trajectory since July last year, with Brent values briefly climbing above $85/bbl in early October. However, more recently prices have moved down to just over $70/bbl. Nonetheless, so far in 2018 Brent has averaged some 34% higher than it did back in 2017. Such an increase is starting to make an impact on global consumption levels. The IEA has revised its figures for growth in oil demand this year, down by 110,000 b/d to 1.3 million b/d, most notably in non-OECD Asia. Vitol has made an even more dramatic revision, with estimates down by 400,000 b/d. Concerns are also mounting that we could see slower growth in demand next year, in part due to a step-up in prices, in part due to the US-China trade war. The IEA outlook for 2019 has been revised down by 100,000 b/d, while Vitol figures are twice that much”, the shipbroker said. According to Gibson “growth in oil demand is a valuable forward indicator for tanker trade. As such, should owners be alarmed by these downward revisions? The crude tanker market appears unaffected at present, with other factors at play. A major rebound in VLCC spot earnings over the past month has been driven by the combination of rising Middle East spot cargoes aimed to support a surge in Chinese demand and an ongoing robust long-haul trade out of the Americas. More demand for international owners has come at a time of marginal growth in the trading fleet, restricted by robust long-haul trade out of the Americas. More demand for international owners has come at a time of marginal growth in the trading fleet, restricted by robust demolition, while weather disruptions have also affected vessel itineraries. Suezmaxes and Aframaxes have benefitted from demolition, while weather disruptions have also affected vessel itineraries. Suezmaxes and Aframaxes have benefitted from the rebound in West African and Libyan crude exports, while much higher VLCC rates have also made smaller tonnage more attractive on certain routes. Going forward, tonne mile demand is expected to continue to increase, led by further gains in long haul trade, mainly out of the US. However, another round in OPEC-led cuts cannot be ruled out in 2019 if robust growth in non-OPEC crude production leads to an overhang in oil supply”. In contrast, the product tanker market is more sensitive to changes in underlying consumption levels, as higher petrol prices at the pump threaten to limit demand in key product importing countries. Gibson noted that “slowing growth could also translate into a build-up in product inventories, a factor with potential negative implications for arbitrage movements. However, a new trend is starting to emerge. Many economies which used the last oil price collapse as an excuse to phase out subsidies, have started reintroducing them again. In Asia, India has cut taxes for retail gasoline and diesel, Malaysia has reintroduced petrol subsidies and the Philippines government intends to suspend planned fuel tax increases next year. Indonesia has announced the freeze in prices for subsidised transport fuels, while Thailand is considering similar measures. Finally, South Korea is evaluating plans to temporarily reduce taxes on retail gasoline. The role of subsidies may become an even more important factor for protecting consumer demand over the coming years if oil prices continue to rise”. The shipbroker concluded that “the last but not the least factor that is likely to aid crude and product tankers alike next year is the IMO 2020. As preparations get under way in the 2nd half of 2019, we could see more barrels being traded, irrespective of potentially slower demand growth across the barrel. Charterers are likely to take advantage of cheaper, HSFO-based freight rates ahead of the switch to 0.5% sulphur bunkers, while refiners race to produce as much compliant fuel as possible and move it into position ahead of 2020”. Meanwhile, in the crude tanker market this week, Gibson said that in the Middle East, “a slow paced week for VLCCs that did allow rates to settle off a little from previous highs, but Owners drew strength from their successful resistance last month and defended a low ws 90 mark to the Far East with levels to the West averaging in the low ws 40’s. Next week will be disrupted by industry events in Dubai but there remains enough to do for November to prevent Charterers becoming too complacent…yet. Suezmaxes remained steady throughout but Diwali Holidays crimped short haul volume and the health of the marketplace relied more upon the spiking rates seen elsewhere, that also provided ballasting opportunities too. 130,000 by ws 125 East, and down to ws 45 to the West remained typical. Aframaxes held very steady through the week with tight early availability propping up more forward opportunity – 80,000 by ws 140 to Singapore, and probably more of the same over the coming week”, Gibson concluded. Nikos Roussanoglou, Hellenic Shipping News Worldwide
The tanker market is set to profit from an increase in tonne-mile demand because of factors including sanctions against Iran and the US-China trade war. But it will also be affected by a slowdown in global oil demand, which has been caused mainly by slowing economic growth in China, India and other emerging economies. However, the incoming International Maritime Organization (IMO) 2020 sulphur cap of 0.5% on marine fuel could mean more barrels traded in H2 2019, before the regulations come into force, which will in turn benefit the tanker market.