Taking an opposite view from many analysts, Concordia expects the tanker market to strengthen from the second quarter compared with weaker outlooks from other sources
In its 2020 annual report, Concordia forecast how it expects world oil consumption to continue to increase in 2021. “With vaccines, stimulus packages and general optimism, the global recovery is now clearly on the right track” it noted.
Concordia sides with investment bank JP Morgan’s forecast that global oil demand will return to 100M bbls by the end of 2021 and notes that Saudi Arabia has injected stimulus into the crude oil price by reducing output by 1M bbls in February and March 2021.
Global stocks of crude oil should fall back towards the five-year average. “For the tanker market, the road there is a bitter pill, but is also indispensable for an eventual market upturn. Things are tough now, but will have a beneficial effect in the longer term,” noted Concordia.
There is more good news on the supply side. The ratio of orderbook to fleet is only 2% and there are very few new contracts being placed. An extended period of low fleet growth will be beneficial to the market. Concordia noted, “Basically, the tanker market is a ’tight’ market, ie, even today there is no significant oversupply of vessels. Despite the fact markets are poor at present, all vessels still have fairly continuous employment and no vessels are laid up.”
Concordia has positioned itself to be ready for the upturn. In his closing remarks, Concordia president Kim Ullman said, “During the last year, we have sent five of the fleet vessels into drydock and will do another three in Q2 2021. In addition to periodic maintenance and upgrades, we have also installed statutory ballast water treatment systems. Doing this during a weak market is obviously better than in a strong one, as earnings are still poor.”
“This means when the market turnaround comes, we will be able focus fully on serving our customers – and actually start making money again. We look forward to doing so,” he said.
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