We have witnessed a considerable expansion of the tanker fleet this year with net growth through October 2017 of 79 DPP tankers and 48 CPP vessels. The fleet is expected to expand further through the remainder of the year; however, as we move into the 2018/2019 period we begin to see a slight shift in fundamentals as discussed in our latest episode of McQuilling TV.
For the upcoming winter season, we expect VLCC rates to follow the traditional seasonal uptick we typically observe during this time of the year; however, the magnitude in which rates rise is likely to be lower than previous years. For the Suezmax sector, we expect demand support out of the Black Sea amid higher crude supply as well as on some short-haul voyages into Europe such as TD20.
VLCC demand along the AG>West trade is likely to remain subdued over the remainder of the year amid OPEC-led production cuts in the Middle East as well as higher crude supply in the US. Regarding Arabian Gulf volumes to the East, we expect ton-mile demand growth of about 1.6% this year, while Atlantic Basin volumes to the East will remained supported by higher US crude exports on the back of favorable WTI pricing.
The International Monetary Fund recently downgraded US GDP growth estimates by 0.2%, which could potentially indicate slower than expected domestic demand for refined products. In our view, this would likely lead to higher clean product flows out of the Gulf to regional trading partners in the Caribbean.
Clean product exports out of the US Gulf remain supportive of MR2 tanker demand amid consistent trading to the Caribbean and South American regions; however, we see potential pressures on the horizon given news of increased refinery operations in Mexico and Brazil.
McQuilling Services discusses the potential impacts the new US administration could have on the oil and gas industry in the context of the relatively recent removal of the ban on US crude exports. The expansion of the US oil and gas industry will likely boost tanker demand in the Gulf with considerable growth to the East.
In McQuilling Services’ 2017-2021 Tanker Market Outlook, we examine the tanker fleet including potential vessel additions, deletions and contracting as well as short term supply disruptions such as vessel delays in port and slow steaming to develop a comprehensive fleet profile in support of our five year forecast.
