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Crude oil tanker market in the doldrums
While commodity traders and brokers are talking up crude oil demand, this is not translating into an improvement in the tanker markets
The accepted wisdom is that as the percentage of the global population that has received full (double-jab) Covid-19 vaccination increases, so should the demand for crude oil as travel bans and awkward quarantine times are relaxed, pushing up demand for transport-related refined oil products like avgas and gasoline.
This is the main theme being offered by commodity traders and brokers to explain demand and prices. The reality for the tanker market is, if anything, the reverse. MSI, in its latest Horizon Monthly (Oil Tankers) is blunt: tanker markets are heading for a weak Q2 2021.
The increase in the crude oil price, now reaching US$70/bbl for Brent crude, is having the impact of reducing import and export requirements by tanker.
MSI reports the main trades, such as exports from the Middle East are weak. In the US, an increase in domestic demand has reduced exports. China has also imposed a series of restrictions on crude oil imports.
MSI notes that crude oil tanker spot rates are far below the levels seen 12 months ago. VLCC earnings were stable but low at US$3,700/day average in May with a slight increase to US$4,000/day in the first half of June. The main driver, Chinese crude oil imports, have been hit by a series of measures aimed at producing a longer-term reduction in carbon emissions.
The main ruling impacting crude oil imports was a ban from the central government on PetroChina trading import quotas with independent refineries. MSI estimates this may reduce 2021 imports by 12-16M tonnes lower, halving year-on-year growth to 3%.
On the Suezmax tanker side, MSI reports spot rates across a basket of trades entered negative territory in May 2021. Despite this, it notes an increase in secondhand values. The delivery profile of new Suezmax tankers entering the fleet will drop away sharply in the second half of 2021, noted MSI.
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