2021 will be a difficult year for tankers. Shipbroker Simpson Spence Young (SSY) chairman Mark Richardson stated “We are still in the midst of the global pandemic and understanding the long-term impact, and the recovery that should follow will be crucial”
Looking at the outlook for 2021, SSY senior director SSY Consultancy & Research Claire Grierson noted that the tanker market endured tumultuous trading conditions in 2020, where tanker rates accelerated to multi-year (and on some routes record) highs before rapidly plunging. 2021 is set to be a challenging year for the tanker market.
OPEC+ had planned to increase crude oil production, but this strategy has altered following Saudi Arabia’s surprise production cuts for February and March 2021. As Ms Grierson notes, the Atlantic Basin will be the focus of crude oil tankers’ attention and “non-OPEC oil supply will be underpinned by sustained flows of Brazilian crude and from Norway, ending government-imposed oil cuts. With Atlantic basin refinery closures and run cuts, a surplus of Atlantic crude could be prime for shipment to Asia, which has recovered faster from the Covid outbreak and is adding new refining capacity, especially in China.”
One factor noted by all is the change in the administration in the US. President elect Biden is known to be less aggressive toward the multinational nuclear deal with Iran, which could see Iranian crude oil officially return if OPEC+ changes its quotas, but as noted by many, the main issue for the tanker market would be the return of the large Iranian tanker fleet.
On the supply side, 2020 saw the lowest tanker deletions for 30 years, meaning the fleet is expected to remain in surplus. The Aframax and MR deliveries will be robust in 2021, according to SSY.
The fluctuating freight rates in 2020 impacted tanker values. According to VesselsValue, the Aframax tanker sector was hardest hit, with 10-year-old Aframax tanker values falling by around 31%.
Looking at 2021 so far, BIMCO chief shipping analyst Peter Sand noted “In the seven days up to 1 January 2021, the US did not record any crude oil imports from Saudi Arabia. It is the first time this has happened. Previously, imports have averaged several hundred thousand barrels per day.”
“For what has long been a very important trade for tanker shipping, the US’ decreasing reliance on crude oil from the Middle East means an adjustment to trade flows, with Middle East Gulf crude oil exports primarily heading east and US exports of crude oil becoming more important than their imports of the same,” said Mr Sand.
“This means several trade pattern adjustments for the oil tanker shipping industry, but given the long sailing distances, not necessarily bad ones,” he said. “BIMCO expects US imports of crude oil from the Middle East Gulf to decline in 2021 compared to 2020,” he added.
MSI notes that the tanker markets at the start of 2021 have been similar to Q4 2020. It notes that product tanker rates have dropped to very low levels.
On the crude tanker side, MSI noted that TD3C has fallen to below US$5,000/day for H2 2021. So far, the time charter rates have resisted following the spot market downwards and remain at around US$27,000/day. MSI sees time charter rates falling across 2021, although slower than in H2 2020.
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