While the sizzling summer months are coming to a close and cooler weather is beginning to set in in the North East United States, political tension in the Middle East and North Africa are causing the mercury to rise and “hot spots” are being ignited. As with many aspects of the energy sector, the impact of these types of events could be fast and far reaching.
We, like many others in our industry, are involved in forecasting the future. Forecasts are estimations of future activities based on models designed to mimic reality. As such they are abstractions that are highly dependent on data, analytical methodologies, and specific assumptions. Whether complex mathematical formulations or simple projections that are based on experience and observation are used, forecasting the future is generally an imprecise and inaccurate activity. The spot market for tanker freight rates is no exception. The uncertainty surrounding the global economy further complicates this exercise while a significant amount of uncertainty remains regarding tanker demand, vessel supply and how their interaction influences rate levels.
Regardless of the state of the global economy, the world renowned Fifth Avenue in New York City is always bustling with optimistic shoppers looking for some relief through retail therapy. It appears that tanker owners, despite the market’s ongoing doldrums, have taken the same approach as they have certainly flexed their checkbooks at shipyards this year.
In August, McQuilling Services publishes a review of our Tanker Market Outlook. At the start of 2013, we anticipated that on the back of a lower delivery profile, an elevated tanker exit program in 2012 and a slightly improving global economy, that dirty tanker rates would find support. Our expectation was the opposite for the transportation of clean petroleum products. Fueled by a seemingly insatiable appetite for new tonnage and a backlog of deliveries, our analysis was contrarian to the market by expecting spot rates in clean trades to weaken over the course of the year.