It’s no secret that the oil tanker market, particularly large crude vessels, felt continued pressure in the first half of 2013. VLCCs, the work horse of the crude tanker segment, took the largest hit mainly due to lingering oversupply. This was further exacerbated by growth in non-OPEC production, namely in the US, as imports fell to the lowest levels since 1996 in the first half of the year. Additionally, OPEC production has declined in some Middle Eastern and West African countries. This has cut into VLCC demand, bringing fixture counts down from 2012 levels (Figure 1). Additional turmoil stemmed from a heavy refinery maintenance program in the first half of 2013, further slashing demand for VLCCs.
The current heat wave on both US coasts makes the idea of going anywhere, with the exception of the beach, an unappealing task. Nevertheless, roads and highways are crowded, which can be somewhat attributed to a slow but gradually improving US economy. As a result, there has been a recognizable boost in gasoline demand. Data from the US Energy Information Administration (EIA) shows that US gasoline consumption has remained above the 8.5 million b/d mark since the middle of May with the upward trend highlighted in Figure 1. This uptick has catapulted US gasoline demand back to the seasonal heights of years prior. While part of this uptick can be explained by seasonality, the improving macroeconomic situation is also supporting this trend.
Situational awareness requires that people know their surroundings and the risks inherent therein. In a crowded theater, one should always make sure to know the way out. The phrase: “In case of emergency, proceed to the exits in an orderly fashion” comes to mind. Many sectors of the shipping industry are presently facing an oversupply of tonnage. How we got here can be debated. The current imbalance of supply and demand cannot. This imbalance is creating a freight rate prospect many would term an emergency. Proceeding to the exits in an orderly fashion may be the best alternative.