Page 21: of Maritime Reporter Magazine (January 2019)

M

MARKETS: Tankers “DESPITE THE AD-

VERSE IMPACT OF

THE OPEC CUTS AND

A SLOWER ECONOMY,

THE IMO 2020 COULD

FURTHER BOOST

CLEAN TANKER DE-

MAND THE NEXT TWO

YEARS, ABSORBING

OVER 10% OF THE

FLEET.”

FOTIS

GIANNAKOULIS, EQUITY ANALYST,

MORGAN STANLEY

Photo: Courtesy Euronav

By Barry Parker ate 2018 saw the tanker pegged the voyage to Japan at World- 4 mdwt, or a little more than 1%, with strength in this sector, telling clients in market bubble upwards scale 97.5, working back to $68,132/ vessel scrapping at 17 million dwt, more a mid-December report, “Despite the through late November, day, with the voyage to Singapore bring- than twice the yearly average over the adverse impact of the OPEC cuts and a with daily vessel hires ing in slightly less. For Suezmax tankers, previous decade. In comparison, world slower economy, the IMO 2020 could

L moving in the direction of, liftings from West Africa into northern oil production (a proxy for demand) has further boost clean tanker demand the though not yet reaching levels not seen European ports were worth more than grown at slightly more than 1% during next two years, absorbing over 10% of since late 2014-2015, when oil prices $35,000/day (and moves into the U.S. these years. the ? eet.” Besides the prospects for more were in freefall and inventories build- Gulf worth more than $40,000/day). Analysts also note the ratio of the ves- distillate (in the form of marine fuels) ing to the brim. A few pundits have sug- Tankers loading Russian oil, in the Black sel orderbook (59 mdwt at end 2018) in moving internationally as the shipping gested that we are seeing a “mini 2014” Sea, and the Baltic were seeing hefty the crude sector, to existing ? eet size industry adjusts to lower sulfur rules, where lowered oil prices are coaxing an- earnings (around $55,000 daily in early (380 mdwt by end 2018), or around old fashioned supply and demand has other inventory build which would drive December for Suezmaxes loading in the 15.5%. This is a respectable percentage, also fueled the runup in this sector, with tanker capacity utilization, and per diem Black Sea, and for Aframaxes loading in particularly when you compare it to the Mr. Giannakoulis noting the: “…mini- freight in? ows, higher. The oil market the Baltic). end of 2008 when the orderbook (120 mal product tanker ? eet growth (+1.7% has changed over four years; OPEC+ Christian Waldegrave, Head of Re- mdwt) was 46% of the existing ? eet (260 YoY) and low orderbook (~8% of the is seeking to pull back on production search at Teekay Tankers, one of the mdwt). global ? eet).” this time (as seen by its announcement largest owners of crude carrying tankers, Waldegrave from Teekay issued his However, the tanker market responds in early December 2018 of a cutback), had enthused in his late November on- report just prior to OPEC’s early De- to the broader currents driving the oil counteracted by U.S. shale oil produc- line market report, “What a difference a cember announcement of a production markets. The December softening in tion and a new wrinkle, U.S. oil exports. few weeks makes in the tanker market.” curtailment. Buoying hires during Q3 oil prices re? ected, in part, nervousness

The big question now – which will play He explained the market dynamics as and through November were produc- about economic slowdowns (the same out in the coming months – is whether follows: “Scrapping has been very high, tion increases from OPEC of around 1 forces pushing stock markets down into the recent uptick, brightening up a gen- and has offset deliveries; for the ? rst 10 million bbl/day, and 0.4 million bbl/day “bear market” territory). Oil prices were erally desultory 2018, is seasonal (win- months of this year, ? eet growth has from Russia- which the analyst cited as dropping again, but, unlike 2014, fears ter cold typically drives demand) or an been less than 1%.” very bene? cial for mid-sized tankers. of economic slowdown, rather than open upward thrust along a longer-term cycle. Statistics from Clarksons, among oth- For smaller “MR” tankers (typically spigots, were responsible for the 2018

As 2018 was drawing to a close, pro? t- ers, bear this out. The strong markets of 50,000 dwt) in the re? ned products price drops which saw Brent contracts ability had returned to all sizes of ves- 2015 into 2016 led to additional order- trades, a basket of “triangulation” routes drop from $86/barrel in early October to sels, in contrast to loss-making earnings ing, with nearly 39 million deadweight in the Atlantic Basin could have earned around $51/ barrel as Christmas was ap- on the ? rst half of the year. Hires on the (mdwt) of crude carrying tankers con- owners around $26,000/day in early De- proaching. The U.S. analog, West Texas bellwether VLCC runs from the Arabian tracted in 2015. During 2016 and 2017, cember, nearly triple the levels of only a Intermediate, had dropped from $75 to

Gulf to the Far East were netting close the net ? eet, accounting for scrapping, month earlier, as computed by CR We- below $43/ barrel.

to $70,000/day. Brokers CR Weber, in its grew by 20 mdwt, or 6% both years. ber. Equity analyst Fotis Giannakoulis Looking forward, the complexity of weekly report at the end of November, In 2018, expected ? eet growth will be at Morgan Stanley hinted at ongoing shipping markets has bedeviled forecast- www.marinelink.com 21

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