Tanker fleet growth to cause concern

Feb 22 2019

Tanker markets have made the most of a solid and much needed boost ignited by falling oil prices starting in early October.

However, this year, high fleet growth will become a problem again, with forecasts of a 3.4% increase in 2019, according to BIMCO’s Peter Sand, as against 0.8% last year.

In 2018, oil prices were pushed down by all-time high Saudi Arabian crude production that peaked at 11.1 mill barrels per day in November.

Earnings for all sizes of crude oil tankers touched $50,000 per day in late November and early December, 2018. US/Saudi politics and Chinese tradesmanship created a temporary recovery for the tanker market, Sand said in a report.

Rates for product tankers followed suit, peaking in December with LR2s and LR1s reaching $32,000 per day, but MRs only fetched $20,000 per day.

After deduction of operational expenditures (OPEX), bunker cost and capital expenditures (CAPEX), all crude oil tanker spot fixtures agreed in 4Q18 were profitable. However, product tankers only saw beneficial spot rates in December, Sand said.

As mentioned, the crude oil tanker fleet grew by 0.8% in 2018, as very weak demand growth brought down freight rates and caused demolition to hit an eight-year high. For 2019, BIMCO expected high fleet growth to become a problem again, forecasting a 3.4% increase this year.

The oil market is notoriously linked to geopolitics. Most recently, the political situation in Venezuela created turmoil in the region and particularly affected crude oil exports.

The recently introduced US sanctions targeting Nicolás Maduro's regime will most probably limit the imports of crude oil into US gulf refineries.

In addition, some product imports may be affected, but BIMCO did not expect it to affect the overall market very much, Sand concluded.


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