Does this Market Rally Have Legs?
*New Industry Note*
In the midst of a tanker market down-cycle, pressured by over-ordering in prior years, DPP freight rates have surged to the highest levels observed since the winter season of 2016/17. Spot rates on the VLCC TD3C trade began September in the low WS 50s before gradually trading up towards WS 60.5 towards the conclusion of the month. Through the first half of October, the market surged to the WS 80s, peaking as high as WS 88. Many market participants will look to this as sign of a cyclical reversal; however, we view this as a temporary shock to the market influenced by various underlying dynamics.
The Return of Brazilian Demand
The Brazilian economy is on track to expand by 1.8% this year, a downward revision from the International Monetary Fund’s (IMF) initial expectation of 2.3% in January. This downward revision is due to lower than expected consumption, exacerbated by fuel strikes observed across the country, placing a halt on the transportation of goods. As a result, refined product demand found pressure in May, particularly for gasoline and diesel with the former finding additional weakness in a preference for ethanol consumption due to higher fuel pricing.
2018 Mid-Year Update
- Global Economic Outlook
- Oil Supply and Demand Outlook
- Tanker Tonnage Demand and Supply
- Tanker Market Technicals
- Asset Market Review and Outlook
- Year-to-Date 2018 Market Activity
- McQuilling Forecast Performance
- Short-Term Outlook 2H 2018
- 2018-2022 Outlook Update
- Analytical Appendix
*New McQ TV Available*
McQuilling Services shares views on the recent development of the OPEC/non-OPEC Production Agreement in the context of upcoming US sanctions on Iran. Global trade flows to the East are likely to adapt to the new geopolitical environment as Iran volumes are replaced by producers in the Middle East and the Atlantic Basin. From at vessel supply perspective, we are likely to see an impact from increased Iranian floating sotrage nextr year.