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OPEC+ Update

Dec. 9, 2022

The Organization for Petroleum Exporting Countries (OPEC) and its allies including Russia, collectively known as OPEC+, agreed to stick to their October plan to cut output by 2 million b/d from November through 2023.  This decision came one day before the EU ban and a G7 price cap on Russian crude.  The G7 and Australia last week agreed on a US $60/barrel price cap on seaborne Russian oil.  Meanwhile Russia has stated they “will not accept” a price cap on its oil and will not supply oil to countries that implement the cap.  The G7 price cap will ...

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Chevron Granted License in Venezuela

Dec. 2, 2022

The US Treasury Department has taken the first step towards easing some of the sanctions imposed on Venezuela, enabling supermajor Chevron to resume limited natural resource extraction operations and crude oil exports to the US.  The Biden Administration’s decision to ease some of the sanctions, implemented by the US in 2019, came after the resumption of talks last weekend between the Maduro government and political opposition groups in hopes this would resolve political turmoil seen in the country. 

Chevron is preparing to ship the first crude oil cargo from Venezuela to the US by late December.  However, we note ...

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Spotlight on India

Nov. 18, 2022

India currently imports most of its crude oil and gas needs and the country exports refined oil products such as ultra-low sulfur diesel and jet fuel, notably to Europe and sometimes the US Atlantic Coast among more “typical” destinations such as Southeast Asia and East/South Africa.  This year, India has shown a strong appetite for discounted Russian crude, and future purchases of Russian crudes by Indian refiners will likely depend on how the EU ban shapes up for seaborne trade and whether these imports will still make economic sense given high freight rates and the resulting market structure.

India ...

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Positive Signs for the MR Segment

Nov. 14, 2022

We continue to see strong prospects for the MR market entering 2023.  A recovery in global oil demand following the pandemic paired with new refining capacity coming online have created positive sentiment for the MR tanker sector.  We have witnessed an increase in ton mile demand as a result of the Russian-Ukraine conflict, a trend we expect to persist in 2023.  A low expected delivery schedule in 2023 and 2024 will likely result in these vessels remaining in high demand.  These versatile tankers continue to operate in an increasing number of regions in the world, capturing about 45% of the ...

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Full Russian Crude Embargo Approaching

Oct. 28, 2022

As the EU embargo on imports of Russian crude approaches on December 5th of this year, we wanted to revisit the topic.  EU nations are mandated to stop buying waterborne Russian crude oil as of December 5th and refined oil products beginning February 5th of next year.  Russia has historically exported approximately 4.5 – 5.0 million b/d of crude oil and about 3.0 million b/d of refined oil products, accounting for approximately 40% of their total export revenue.


As a result of the December 5th sanctions, we project a major contraction of VLCC cargoes ...

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Tight Shipyard Capacity to Slow Delivery

Oct. 21, 2022

Compensated Gross Tonnage (CGT) is a measure established by OECD to compare the labor required to build a ship across different shipyards and countries.  The latest available data confirms that 2022 has been a year of historically high capacity utilization, spread across almost all types of vessels, with 2023 following closely before we begin seeing a drop due to lack of complete future order data.


Chinese shipyards have the top CGT figure for 2022 with a little over 12 million CGT or about 41% of the total, followed closely by South Korea at 11.13 million CGT.  According to a ...

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The Impact of OPEC Cuts on Global Crude Balance

Oct. 14, 2022

OPEC+ decided at their October meeting in Vienna to reduce production by 2 million b/d beginning in November.  The rationale given was to spur a recovery in crude prices despite calls from the US to pump additional supply to help ease pressure on the global economy.  OPEC has stated that higher oil prices are necessary to kickstart fresh investments in oil production although other market participants like the IEA are skeptical, taking the position that constraints among oil producers meant additional supplies would be scant. The reality remains that OPEC’s own members are currently struggling with a lack ...

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VLCC Fleet Development Updates

Oct. 7, 2022

The cumulative net fleet growth for the VLCC segment is expected to reach 48 tankers by the end of 2022 according to our latest analysis (Figure 1).  The past month we saw an additional net 6 VLCCs returning from floating storage, in addition to the 6 captured fleet additions.  For the balance of the year, we expect deliveries to continue at a good pace (about 10 new VLCCs in Q4), on top of a high number of ships returning from drydock (net 4) as well as at least 4 rejoining the DPP trading fleet after delivering CPP products on their ...

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The Impact of the US SPR Releases

Sept. 30, 2022

The length in the US balance over the last four months and the upcoming two months is primarily driven by the 1.0 mil b/d inventory draws from the US SPR, and secondarily by 0.6 mil b/d of US crude output gains.  Initially, SPR draws were overweighted to Mars (medium/sour), a highly demanded crude in the US refining system.  Beginning in August, the draws are more biased towards light/sweet crude.  With the US refining system likely at max intake of light/sweet, the impact is a widening WTI/Brent spread and significant arbitrage opportunities for ...

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LATAM Tanker Demand Update

Sept. 23, 2022

The short-term outlook for the Caribbean region begins to reveal the impact of increasing crude production from Guyana.  Latest data shows supply reaching 2.821 million b/d in the region for 2022, a 249,000 b/d jump y-o-y.  With crude oil demand remaining flat (no additional refining capacity) crude balance is expected to lengthen by 233,000 b/d in 2022, reaching 1.8 million b/d.  The export availability has boosted flows to (among other destinations) the US Gulf where refineries are replacing Russian fuel oil feedstock with heavy crudes from the region, but also to the ...

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Elevated CPI Likely to Push Interest Rates Higher

Sept. 16, 2022

US CPI rose 8.3% in August from a year earlier, as the higher-than-expected inflation report diminished hopes the Fed could scale back the pace of rate policy tightening in the coming months.  Inflation remains significantly above the Fed’s 2% target.  The firmer-than expected print is an issue on two fronts.  The first reflects the current state of inflation and its impact on people’s cost of living.  The second facet is how it will influence the Federal Reserve’s behavior going forward.    The market is now forecasting a terminal rate (peak of the benchmark interest rate) of 4 ...

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The Impact of Ghost Tonnage on DPP Tanker Supply

Sept. 9, 2022

One major complexity regarding statistical analysis of deletions is the fact that we must account for the overall behavior of conventional tanker owners, but also external factors such as ghost ships and other sanctioned vessels.  Our updated methodology measuring the impact of “ghost ships” and sanctioned tonnage emerged from the initial observation of the large number of vintage DPP tankers (mainly VLCCs) that were sold for premiums in the secondhand market.  These vessels continued trading utilizing techniques such as turning off their AIS transponders or engaging in open sea STS operations, raising the question of how these units should be ...

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Iran Sanctions Relief: Updated Analysis

Sept. 2, 2022

Following the Trump administration’s decisions to reinstate sanctions on Iran to thwart its nuclear ambitions, Iranian crude oil production averaged about 3.0 million b/d in 2021 and 2022ytd.  In a sanctions-relief scenario, we anticipate that Iranian production will regain the 4.0 million b/d within 15 months.

At the same time, we project Iranian crude oil exports to have settled at 0.9-1.0 million b/d, a derived figure after subtracting domestic refinery demand and condensate splitter utilization.  Regarding the latter, we estimate that approximately 27 Iranian-owned (NITC) VLCCs are engaged in floating storage operations ...

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A Look at VLCC Newbuilding Pricing

Aug. 5, 2022

Our model used to forecast newbuilding asset prices relies upon a multi-variate approach including a McQuilling-developed forward steel index, prevailing and projected market earnings, as well as yard capacity and long-term interest rates.  The advantage over traditional methods of correlating asset prices to earnings is that the model can explain to a reasonable degree situations where newbuilding prices may be performing differently than earnings would suggest, which have a much better correlation to secondhand prices.  This was perhaps never more evident than the last 18 months, as newbuilding VLCC prices continued to trend higher from commodity inflation and exuberant ordering ...

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LPG Carrier Market Relief

July 29, 2022

In the January 2022 Tanker Market Outlook, we expanded our analytical coverage of the gas market by looking into the LPG market fundamentals and generated our first earning outlook for VLGC carriers.  Given the recent geo-political events and energy crunch, we have updated our statistical forecasting models for VLGC demand, supply and future earnings.


After a 10.8% annual growth captured in 2021, the LPG carrier demand measured by ton-mile is expected to increase again by 11.2% in 2022 and over 5% per annum for the next five years.  One of the main drivers for this bullish story could ...

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A Firm US Gulf Story

July 22, 2022

The Atlantic Basin market has again become the main driver of the bullish sentiment this past week, especially for VLCCs.  According to our proprietary commercial fixture tracking, we counted a total of 21 Eastbound VLCC cargoes and 10 loadings to Europe in the month of July, significantly higher than 16 Eastbound and 6 Europe-bound cargoes a month ago.  The active VLCC fixings in the US Gulf pushed rates higher for both Eastbound and Europe-bound routes.  The benchmark TD22 (VLCC USG/China) freight rates opened the week at US $7.2 million and now reported last done at US $7.45 ...

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LR2 Fleet Development Updates

July 15, 2022

The cumulative net fleet growth for the LR2 sector in 2022 is expected to come at negative 5, as a result of a number of factors that are affecting ship supply in the sector, both fundamental and structural.  

Deliveries for the year are limited to an expected 17, significantly less than the average of 25 per year seen in the last decade.  On the deletion side, we have counted 4 LR2s so far in the year and expect this number to double by December (Figure 1).  This relative “discipline” of LR2 tanker owners is partially responsible for the much better ...

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VLCC Fleet Development Updates

July 8, 2022

The cumulative net fleet growth for the VLCC sector in 2022 is expected to reach 19 vessels according to our latest data revisions (Figure 1).  For the past month, we saw a net increase of 6 vessels, including 4 that have returned from floating storage operations.  We do not expect any significant structural shifts owing to floating storage operations (or even a surge in drydocking) for the balance of the year, especially if we consider that the crude oil market remains backwardated, thus there is little incentive to build up stocks.


In terms of deliveries, June saw a net 5 ...

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LR2 Floating Storage Development

June 24, 2022

The LR2 market has been strengthening over the course of the last two weeks, with the benchmark TC1 AG/Japan trade swinging from a low WS 185 to a peak of WS 330 and closing the current week at WS 290.  The fundamentals in this market remain positive, considering the rising demand for oil products (combined with the sanctioning of Russian cargos by western countries), but also the increased expected supply in the Middle East. In fact, we expect about 743,000 b/d of added refining capacity in the region this year, with the 615,000 b/d Al ...

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Crude Balance Revisions – Impact of Policy Shifts

June 17, 2022

The latest revision of global crude balance data revealed a higher-than-expected buildup for the month of May, with a little over 800,000 b/d (Figure 1).  However, looking at the bigger picture we note the inventory buildup for the first half of 2022 is expected to reach 350,000 b/d, a relatively small number considering the rallying global demand at the refinery level.  Going forward, the expectation is for demand to continue to outpace supply, leading to further de-stocking and likely contributing to sustained weakness in the VLCC market.


There were two policy shifts that could have a ...

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Emerging East and West CPP Trends

June 10, 2022

In the West of Suez markets, product demand in the Caribbean and Latin America regions has been increasing to pre-pandemic levels, exacerbated by factors such as severe droughts in Brazil that have necessitated importing higher volumes of gasoil for power generation.  With gasoil balances in Europe tightening after the ceasing of Russian imports, the US Gulf region refining system emerged as the “natural” market for those requirements.  Combined with incidents of inclement weather in the Gulf the past two months, freight rates for MR2 tankers gained, and for the most part retained strength with the USG/CARIBS MR2 trade gaining ...

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Cargo Switchover Activity Supporting LR2 Rates

June 3, 2022

Cargo switchover activity has been on the rise lately, with a clear trend forming among coated Aframax/LR2 owners in switching their tankers to trading dirty after the volatility caused by the war in Ukraine and risk premiums boosted rates.  Looking at past statistics, there has been some cyclicality on cargo switchovers that has affected Aframax/LR2 market accordingly, but since Q3 2021 we have observed a strong uptick in LR2s beginning to trade dirty, given the low earnings environment.

With the start of the war in Ukraine and subsequent sanctioning of Russian oil (official and self-sanctions), Aframaxes found opportunity ...

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Venezuela: Will Sanctions Relief Boost Market?

May 20, 2022

This week, news about the US government exploring possible sanctions relief scenarios for Venezuela became a hot topic, especially as inflationary pressures have sent gas prices at the pump soaring.  While some analysts claim this, for now, could only be an incentive to bring the Maduro government back to the negotiating table, it is worth exploring the potential impact on the crude tanker markets.

Current Venezuela crude oil production stands at about 650,000 b/d according to the latest data from JBC Energy (Figure 1).  This figure is likely to trend upwards even without sanctions relief, especially after some ...

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Tankers – When Does Investing Makes Sense?

May 13, 2022

There is a misconception that cyclicality in the tanker markets follows the changes in oil supply and demand.  Historically cyclicality in tankers has less to do with underlying oil fundamentals and more to do with owners’ tanker contracting behavior.  To put it simply, when market returns are favorable, owners are increasing tanker orders and filling up yard capacity (this is true for all segments, not just tankers).  Naturally, these vessel orders lead to the next high supply environment, whereby this oversupply pressures earnings, stalling ordering and resulting in the next upward cycle as deliveries grind lower – a situation we are ...

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Crude Balance Revisions: More Headwinds

May 6, 2022

Revised global crude data is beginning to verify the tightness observed in the physical markets after the Russia-Ukraine war began.  For April, we saw the projected balance length increase to 691,000 b/d, likely the highest surplus for the entire year, but still far from adequate to produce any meaningful results for the tanker markets.  In fact, despite the length, we project an estimated 0.15 million b/d of draws for the first half of the year. 

With demand on refineries expected to increase going into the summer months in the northern hemisphere and structural challenges from Russian ...

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CPP Fleet Utilization Spikes

April 29, 2022

Clean tanker utilization has exhibited a strong upward trend since the beginning of the war in Ukraine, predominantly for the LR2 and MR2 sectors.  This jump can be attributed to two main factors.  On one side, most nations are moving past the pandemic and global demand for products is picking up.  On the other side, it represents an effort from traders to meet demand in Europe (mainly) from refining centers in the East of Suez but also the US Gulf, especially now that significant volumes from Russia are “lost”. 

There are still numerous questions regarding the future of product supply ...

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CPP Vessel Contracting & Fleet Profile

April 22, 2022

CPP vessel contracting activity has been significantly lower than the same period last year, with only a total of 9 orders for MR2 tankers, compared to 29 MR2 orders for Q1 2021 (Figure 1).  Similar to the DPP sector, subdued activity can be partially attributed to shipyards being close to their full capacity (on mostly other type of vessel orders such as containerships) as well as the very high steel prices that make a newbuilding uneconomical for the long run, even if the current volatile environment is currently benefiting rates.

With our multivariate models pointing to the price of steel ...

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DPP Fleet Ordering Activity and Profile

April 8, 2022

DPP vessel contracting activity remained very low during the first two months of the year with only two Aframax tankers ordered in January (Figure 1).  Steel prices continue to be very high and shipyards have limited capacity -owing to strong ordering for other types of vessels such as containerships and gas carriers-, pushing prices of newbuildings upwards. In the current context of increased market uncertainty and volatility due to the situation with Russia and Ukraine, our multi-variate models project average DPP tanker asset prices to slightly increase this year and proceed to stabilize throughout the period 2023 to 2025. 

This ...

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Sanctions Removal Scenarios

April 1, 2022

We have counted over 80 VLCCs of over 15 years of age changing hands since January 2020, the majority of them going to previously unknown entities, mainly in Asia (Figure 1).  Out of those “ghost ships”, about 40% has been observed to load in Iraq, perform STS operations near Malaysia or turn off their AIS transponders.  All of these actions point to those tankers participating in illicit trading activities most likely with Iranian or Venezuelan barrels.  As we have discussed in previous reports, these tankers are part of the oversupply problem given they are taking potential cargos away from conventional ...

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VLCC Fleet Development Overview

March 25, 2022

The cumulative net fleet growth for VLCCs in 2022 is forecasted to reach 36 vessels after the latest data revisions.  By end of February, we have estimated that another eight VLCCs have returned to trading from floating storage, with the balance now at pre-pandemic levels.  This has added more pressure on rates especially since the current market conditions of steep crude contango remove any incentives to store crude for economic gains.

We expect March to be a month of heavy delivery schedules, with ten VLCCs projected to join the trading fleet from the yards and another three likely to do ...

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Preliminary Look at the EEXI Impact on VLCC Tankers

March 18, 2022

Taking a break from current events, this week we look at the upcoming EEXI regulations and the results of our preliminary analysis of the impact on VLCC tonnage.  EEXI, like EEDI refers to an efficiency level that a vessel in service will be required to achieve, measured as maximum grams of CO2 emitted per capacity (dwt) ton-mile under reference conditions for each vessel class.  The entry of this index into force will likely come at the first quarter of 2023, with the first year possibly taking the form of an adoption period before shipowners are required to take action to ...

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Crude Balance Revisions

March 11, 2022

The latest data from JBC Energy reveal the difficulties OPEC and allies have been facing to produce up to their assigned quotas, with the exception of core members such as Saudi Arabia and Russia.  After a 350,000 b/d global balance deficit in January, and with demand at the refinery level not slowing down, the expected February surplus came only up to a meager 89,000 b/d (Figure 1).  Combined with the very high crude prices throughout the month, there was little to no incentive to build up inventories and support crude tanker demand.

The war in Ukraine ...

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Further Analysis on Potential Russian Sanctions

March 4, 2022

Using historical numbers, we estimated that upwards of 50 Aframax and 4 Suezmax cargos per month from the Baltic could be at risk.  In the Black Sea, despite most volumes coming from Kazakhstan and Azerbaijan, a complete halt of marine traffic could lead to up to 39 Aframax and 22 Suezmax cargoes per month lost due to lack of ship supply (Figure 1).  Substitutive barrels are being met by regional sources at present (Libya, North Sea) to augment left-over Russian crude liftings from prior purchasing. 

In 2021, about 4.7% of Med and 5.7% of Baltic Suezmax cargos was ...

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Russian Crude and Product Highlights

Feb. 25, 2022

With uncertainty and volatility the main themes in the tanker markets this week, we look at high level numbers for Russia’s crude and product supply and exports in an attempt to quantify a full sanctions scenario.

Current Russian crude oil production stands at 10.9 million b/d divided among large and small producers.  Out of this volume, approximately 5.9 million b/d are consumed domestically in the country’s refining system.  From the remaining balance, JBC Energy data reveals that about 4.6 million b/d are destined for exports, with China responsible for taking about 30 ...

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Project Investment Conundrum

Feb. 18, 2022

The “battle” between charterers and owners is alive and well in today’s projects market, precluding long-term time charter contracts from being executed.  The disconnect between prevailing time charter rates and asset prices has likely never been wider, as asset values have found support from inflationary pressures and tight shipyard capacity, which in-turn have dissuaded owners from divesting out of existing tonnage as replacement costs are high.  In that though, is the conundrum:  asset prices are not reflecting demand/supply dynamics, but owners are unwilling to invest in modern tonnage at these levels because charterers are pricing contracts to reflect ...

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Iran Deal Implications

Feb. 11, 2022

The discussion about Iran and the potential sanctions removal has two main questions.  When will the Iranian barrels return (assuming talks progress further), and what will be the impact in the tanker markets.

To answer the first question, we looked back at the timeline of the Joint Comprehensive Plan of Action (JCPOA) in 2015.  The deal was concluded on July 14, 2015, and the UN Security Council endorsed it on July 20.  Exactly 90 days later, “adoption day” triggered Iran and the other members of the deal to take action to meet their commitments.  It was not until January 16 ...

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OPEC Price Wars: Who Benefits?

Feb. 4, 2022

In trying to determine what can cause a strong tanker market rebound, we looked at past events and under what conditions they occurred, excluding any events that affected only the supply side (e.g., the COSCO sanctions).

The first one was the 2014 price war initiated by Saudi Arabia and Russia against the fast-growing US shale oil producers.  At the time, OPEC producers exceeded their production ceiling almost every month and the US kept adding to its output leading to a market glut, that was exacerbated by a slowdown of China’s economy.  As a result of OPEC and Russia ...

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McQuilling Services Tanker Market Outlook 2022-2026

Jan. 28, 2022

McQuilling Services is pleased to announce the release of its 25th anniversary edition, 2022-2026 Tanker Market Outlook.  This 165-page report provides a detailed analysis of oil fundamentals, global economic and geopolitical context in addition to tanker demand and supply projections across eight vessel classes. The interaction of tanker demand and vessel supply variables is processed using advanced quantitative modeling to produce a five-year spot and time charter equivalent (TCE) forecast for eight vessel classes across 24 benchmark tanker trades, plus four triangulated trades.  Also included in the report is a five-year asset price outlook as well as one and three-year-time ...

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Refinery Runs: A High-Level Overview

Jan. 21, 2022

In 2021, total crude oil intake at the refinery level averaged 77.9 million b/d. some 3.1 million b/d higher than 2020 (Figure 1).  This was the result of a world with less mobility restrictions, especially as vaccination programs became more widespread and efficient and healthcare systems increased their experience in managing infections.  While this was a strong recovery figure, total intake did not reach pre-pandemic levels as many had predicted at the beginning of the year.  Some of the reasons for that were the emergence of new virus variants (primarily Delta) that spread rapidly and forced ...

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Is a Crude Tanker Recovery on the Horizon?

Jan. 14, 2022

As revisions on global crude balances become available, we like to dive into the data to attempt to extract insight as it relates to the tanker markets.  With a new year beginning, we are still in a very volatile environment, with a pandemic that lingers and new variants like Omicron once again generating more questions than answers for the global economy.  On top of that, inflationary pressures, high energy prices and supply chain bottlenecks, all add to the uncertainty surrounding economic recovery in general and the tanker markets more specifically. 

The latest data from JBC Energy reveal that the global ...

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