Crude Oil Supply And Tanker Demand Report Available From Drewry

During the 1970s, the influence and importance of expanding oil supplies close to the major oil consuming nations has grown rapidly. Rising output from new p r o d u c i n g areas has increased the availability of shorthaul crude oil supplies, thereby displacing significant volumes of long-haul supplies in the global pattern of seaborne oil trades.

Growth in aggregate world tanker demand has consequently been dampened, exacerbating the depression in the oil shipping sector.

Since the 1973 Oil Crisis, a number of OPEC countries have adopted production ceilings in the interests both of conservation and of maximizing revenues in the long-term. In the wake of the Iranian Crisis, these ceilings have been strictly applied. Oil exports from the Middle East have for some years served to balance global supply and demand, but since 1973 the political and economic climate in the Middle East has changed; the new emphasis on conservation has been accompanied by a manifest unwillingness to increase output merely in response to higher energy demand in the major consuming nations.

In this context, oil supplies from non-OPEC areas are becoming increasingly sought after, particularly "new" supplies from such areas as the North Sea and Mexico.

H.P. Drewry's Study No. 76, "Crude Oil Supply and Tanker Demand," focuses on recent and possible future trends in world oil production, and assesses their effect on tanker demand.

This report reviews the world oil market in 1977 when, after a period when the market was distorted by the two-tier pricing system, oil supplies were in excess of demand; sluggish growth in demand restrained the growth in both world oil production and consumption. An outline of trends in production, consumption and seaborne oil movements is followed by an analysis of the tanker demand generated by intraarea seaborne oil movements, which totaled 299.1 million dwt, compared to an average fleet employment in oil trading for the year of 318.0 million dwt. The difference between the two figures was attributed partly to inter-area trading (20.1 million dwt), but mainly to operating inefficiencies (68.8 million dwt).

Had all the operating inefficiencies been accounted for by slow-steaming, then the fleet would have averaged 11.75 knots during the year, compared to the commonly accepted normal service speed of 15 knots.

Following a thorough, worldwide, country-by-country examination of recent and expected future trends in production and available export surpluses of crude oil in the period up to 1985, six areas outside the Middle East emerge as likely sources of significantly increased supplies of short and medium-haul crudes.

These areas are the three "traditional" suppliers of short and medium-haul crudes — North and West Africa, the Caribbean (excluding Mexico), and the Far East (excluding the People's Republic of China) — and three relative newcomers—Alaska, Mexico, and the North Sea.

Based on the data from the preceding section, Section Three illustrates the potential impact of the production forecasts on tanker demand. It reappraises the role of the traditional suppliers of short-haul crudes, and analyzes the impact of both these supplies and expanding production from the "new" areas on tanker demand. The p r o s p e c ts presented by the expanding development of the oil industry in the People's Republic of China are also reviewed. By the mid- 1980s, supplies of short-haul crude to major markets could potentially be sharing an increase in the order of 250 mta compared to present levels. However, if current political and economic constraint continue in the producing countries this potential may not be achieved. A great deal depends on a refining and consolidation of politics and economic planning in general, and oil policy in particular, in countries such as Libya, Nigeria, Venezuela, and Mexico, which are among those outside the Middle East with the greatest potential f o r an expansion in oil production in the 1980s.

The Study concludes that by 1985 a total in the range of 67-95 million dwf of long-haul tanker demand could have been displaced by increased oil production from short and medium-haul sources.

Since the long-haul routes are largely tonnaged by VLCCs and ULCCs, the implication is that this displacement of l o n g - h a ul tanker demand will deal a blow to employment prospects f o r large tankers, and serve to further the trend already evident toward medium- sized ships.

"Crude Oil Supply and Tanker Demand," No. 76 in a series of reports on various aspects of shipping prepared by the Research Division of HPD Shipping Publications, 34 Brook Street, Mayfair, London W1Y 2LL, England, is available at a single copy rate of US $95 (all overseas orders) or £40 (UK only), or on a subscrip- tion basis US $360 (all overseas orders) or £150 (UK only) for the series 71-80.