The product tanker and chemical tanker fleets reflect their more recent evolutions, particularly on the larger segments. Correspondingly, owners’ interest is skewed towards LR2 (coated Aframaxes) and MR2 (Chemical) tankers with a surprising disinterest for new LR1 orders. As of January 2018, we calculate the orderbook percentage of LR2s and LR1s at 15% and 6%, down from 20% and 12% at the same time last year, respectively.
Suezmax demand outpaced all other sectors in 2017, growing from 2.35 trillion ton-miles to 2.59 trillion ton-miles, about a 9.8% change supported by increased Middle East flows to Europe and long-haul trading from the West (Southern Europe primarily) to the East. However, we observed weakness in the West African Suezmax trades into Europe amid higher crude oil output in the latter and a sizeable shift of Brent-linked West African volumes heading to the East aboard VLCC tankers.
With each publication of our annual outlook, we continue to incorporate enhancements based on our internal review and feedback from clients. This year is no exception and several enhancements in research, methodology and presentation have been included in the 2018-2022 Tanker Market Outlook.
The fall in shipping deals witnessed since 2014 continued into 2017 as reported deals were valued at an 11-year low of US $28.9 billion (Table). Investor sentiment remains weak as the total value of shipping deals in 2016 fell 40% year-on-year. Institutions continue to exit the shipping space as market fundamentals pressure the earnings environment, reducing investor returns. However, we do note that the emergence of leasing companies has increased the allocation of capital by “other debt” participants to 36%.
In this year’s Tanker Market Outlook, we have adjusted the benchmark VLCC route to TD3C AG/China (270,000 mt Ras Tanura to Ningbo) to better represent earnings in this sector in conjunction with the industry’s demand to do so. We have expanded our coverage of the Suezmax sector to include the AG/Mediterranean (140,000 mt Basrah to Lavera) trade, giving us a better perspective on Suezmax earnings to the West.
Our overall forecast performance for 2017 was within 6.4% of actual market freight rates across the 19 trades that were monitored in the 2017-2021 Tanker Market Outlook. This was achieved throughout a year that could be characterized by significant tanker oversupply, geopolitical tensions and e volving oil market fundamentals. This metric is a measure of the absolute average of the total variation on a trade-by-trade basis, regardless of whether we overcast or undercast the market on each trade. In other words, it is a measure of how close we came, on average, to the actual spot market rates observed ...
In 2017, we recorded the average mileage for DPP maritime volumes to be 4,564, a 2.3% rise from 2016 levels and 6.8% higher than the beginning of the decade. The most impressive gains were present in the Suezmax sector, whereby average voyage-mileage increased 3.6% in 2017 due to increasing Southern European flows to Asian refining centers amid crude pricing arbitrages. VLCC mileage increased 1.2% to 6,689 miles in 2017 as a decline in Middle East flows to the West were offset by market gains in Atlantic Basin exports to the Asian refining complex (Figure ...
The concept of real time demand using remotely sensed vessel position data is predicated on the ability to draw conclusion about a vessel’s condition at a certain point in time. The ability to capture daily demand is a step change in current methodologies of assessing ton-mile demand. Historically, tanker demand (measured by ton-miles) relied upon lagging data, often times incomplete and revised at a later point. Delving further into daily demand data, we explored the delineation of the data to account for disadvantaged tankers. At this stage, the definition is simplified to include vessels that are over the age ...
A beginning inventory figure for the eight vessel classes we track is extracted from our proprietary database during the Tanker Market Outlook process. For the clean sectors, we historically calculated supply for product carriers and IMO 3 class vessels only; however, are now including the Chemical IMO 2 fleet due to its increasing utilization for the marine transportation of refined products amid volatile chemical tanker demand. Chemical ships with an IMO II/III designation are evaluated on a monthly basis to determine whether their classification has changed and updates are reflected in our inventory numbers.
Tensions in the Middle East rose significantly in the second half of 2017 amid increased internal conflict within Iraq. The Iraqi conflict between the central government and the Kurdish Regional Government (KRG) made headlines at the close of September 2017 as the KRG conducted a referendum to become an independent nation from the central government. Included within the referendum was the city of Kirkuk, which the central government of Iraq viewed as a method to consolidate Kurdish control over oil infrastructure. As a result the Iraqi military conducted an operation to regain control of the Kirkuk area, its oil assets ...
Global crude supply growth is projected to rise by 1.5 million b/d, despite continued efforts from OPEC and non-OPEC countries to reduce output levels, according to data from JBC Energy. After feeling declines of about 545,000 b/d year-on-year in 2017 the Middle East is expected to make modest gains of 135,000 b/d this year. This figure could change considerably if we see a reduction of compliance or a failure of the extended accord; however, both are unlikely through 2018.
Looking back on 2017, global oil product demand rose by approximately 1.5 million b/d amid a combined 884,000 b/d of additional gasoline and diesel/gasoil demand. Global demand levels are poised to rise 1.3% year-on-year in 2018 amid higher requirements for all refined products excluding fuel oil which is expected to experience demand declines of 0.7% year-on-year, according to JBC Energy (Figure 1). The highest amount of growth expected this year is within the jet fuel/kerosene sector with 2.1% growth year-on-year, while demand for diesel/gasoil and gasoline is on track to ...
The Mediterranean/Black Sea has grown as a West to East crude exporter with 23 VLCCs loaded in this region bound for the Far East and South East Asia in 2017 versus 17 in 2016. Considerable growth has also been witnessed in the Suezmax sector with 176 vessels loaded for East discharge in 2017 compared to 109 in 2016. The growth of crude output in Kazakhstan coupled with redirected Russian barrels from the Baltic Sea to the Black Sea has supported this market, which we expect to continue in 2018; however, we note that increased production cut compliance in Kazakhstan ...
Data from the International Energy Information Administration (IEA) indicates that OECD oil stocks (including strategic petroleum reserve) rose about 140 million barrels year-on-year to average 4.6 billion barrels in 2016 as Brent crude oil pricing consequently traded down nearly US $10/bbl to average US $43.50/bbl. This trend significantly changed with the turn of 2017 as OPEC led efforts to reduce crude production coupled with record refinery throughputs supported a drawdown of global storage volumes. While data for the fourth quarter of 2017 has yet to be released, when comparing the first three quarters of 2017 to ...
The European Continent experienced political volatility this year amid presidential elections, independence disputes, and Brexit negotiations. Chancellor Merkel secured a fourth term at the head of Germany, providing confidence in staying the current course as opposed to the prospect of new leadership and policy uncertainty. Despite this, GDP growth in Germany is forecast to fall from 2.0% in 2017 to 1.8% in 2018, likely to be dragged down by the overall performance of the Euro Area.
According to JBC Energy, it is estimated that the European region (Northern Europe + Mediterranean) will produce 22.9 million b/d of refined products in 2017, while demanding 20.9 million b/d, which would imply an 182,000 b/d rise in product balances year-on-year, basis 20.7 million b/d demand and 22.5 million b/d supply in 2016.
Both regions have supported clean product trading with ton-mile demand out of Northern Europe over the first nine months of 2017 averaging 2% higher than 2016’s full year average, while the Mediterranean has observed significant growth of ...
At the start of 2017, the Organization of Petroleum Exporting countries and non-OPEC production cut agreement was implemented to cap oil output levels, reduce global supply and support crude pricing. With the majority of OPEC members included in the agreement apart from Nigeria, Libya and Iran, official monthly production data from OPEC tells us that total oil output from the group was reduced by an average of 620,000 b/d year-on-year, through the first 11 months of the year. Russia was also major contributor, keeping production relatively flat year-on-year at 10.9 million b/d, a 300,000 b ...
The main driver behind the interest in US crude has been pricing incentives as considerable pressure has been placed on WTI in comparison to other benchmarks. US crude production rose 4% year-on-year to an average of about 9.2 million b/d in 2017, while Canadian output is also up around 4-5% in 2017. As a result, the North American crude balance is on track to expand by 4.7% in 2017 to 14.2 million b/d putting significant pressure on WTI relative to Brent. The wide differential between these benchmarks and the upward pricing pressure on Dubai due ...
