On the outset, one might not directly see a similarity between Valentine’s Day and the tanker market; however, both can sometimes require serendipitous timing in order for desired outcomes to transpire. Furthermore, just like the dating world, the tanker market is full of volatility. Industry participants have been reminded of these market swings thus far in 2014 as the market witnessed its biggest spike in the last five years before losing steam at the beginning of this month. This volatility has been particularly prevalent in the VLCC and Suezmax tanker classes, but also visible in the Aframax and Panamax segments.
Following our recent series of Industry Notes discussing our forecasting methodologies, this note touches on the foundation on which 2014 starts. Looking at the global economy, although markets seemingly having a hard time digesting recent moves by the US Fed to scale back its bond purchasing program, a recovery appears to be on the horizon. One notable difference when compared to recent years has been that OECD economies, in particular the US, comprises a larger contribution to this development. Click the PDF icon to download the full report.
This note discusses an important element of McQuilling’s forecasting process, the development of tanker demand. At a global level, marine transportation demand is related to world trade, which is directly related to the state of the world economy. This means that demand for crude oil and petroleum products grows with an expanding global economy. Marine transportation demand for tankers is a derived demand. It arises from the energy consumption requirements of regional economies. Petroleum product marine transportation demand arises from matching consumption with refined product production in refining regions. Integrated with the supply logistics chain for petroleum, crude oil marine transportation demand for tankers arises from matching refinery raw materials requirements with crude oil production.
This note discusses an important element of McQuilling’s forecasting process, the development of tanker supply. Tonnage supply in the tanker shipping market today must be viewed in the context of the last 45 years of marine crude oil and petroleum transportation activity. There has been a massive shift of tonnage and cargo carrying capacity away from the larger tanker sectors and towards the smaller tanker sectors over the last generation of 25-30 years.
The marine transportation system described by the global carriage of crude oil and petroleum products is by nature imperfect and highly inefficient. If it were perfectly efficient, tankers would be able to load their next cargoes in the same location that they discharged their last cargoes and sail loaded at full capacity on all voyages. However, in reality, tankers spend a significant portion of their trading lives sailing empty or otherwise inefficiently deployed.