Tanker owners have been operating in an environment of weak global oil and products demand growth, supply disruptions, financial uncertainty and geopolitical tensions. On their own, these factors would be enough to pressure the market but the steady inflow of tonnage from previous years’ orderbooks further exacerbates the situation. Although the delivery profile is expected to slow around 2014, short-term fundamentals will be pressured by an oversupply of tonnage.
Since the start of March, VLCC rates and TCE revenues have been elevated to levels that owners perhaps thought had been consigned to history. In the market of elevated bunker prices, oversupply of tankers and declining Iranian export volumes, the steady increase seems to have caught some market participants by surprise. Although we see factors that should provide a floor to rates, some circumstances that have been supporting rates are likely to gradually vanish in the coming weeks.