Teekay: the tanker market is facing some near-term headwinds during Q2-2019 in the form of OPEC supply cuts, extended refinery maintenance and high fleet growth
Teekay’s director of research and commercial performance Christian Waldegrave has broadcast the company’s latest Tanker Update.
Mr Waldegrave noted that 2019 started on a positive note. “Q4 2018 was the best Q4 since 2015, and a lot of that positivity spilled over into this year,” he said.
Rates declined in March and April, which he regarded as seasonal, but there were also some particular crude oil supply-side problems.
“We have seen OPEC supply cuts and that has affected crude tanker rates,” he said, and he noted that Saudi Arabia and the Gulf countries had maintained their promised supply cuts and had actually gone beyond their notional cuts.
In addition, there were unplanned outages in Libya and Venezuela. “Venezuelan oil output started the year at around 1.2 to 1.3M b/d and is now around 0.6M b/d,” he said. “This has affected the Aframax and Suezmax sectors in particular.”
The other factor is the high fleet growth. “The tanker fleet has grown by 2% in Q1 ,” he said. “There are 33 Suezmax tankers due to enter the fleet this year, and 28 of those are due in Q1 and Q2.”
Due to the front-heavy nature of the delivery schedule, growth will be lower in the second half of the year. There has also been sufficient market activity to hold at bay scrapping activity in the tanker sector.
The good news from Teekay is that it expects the above headwinds to reverse during Q3 2019 onwards and into 2020.
One expectation factored into this projection is the reaction of refineries. “We think the refineries are going to go all out in the second half of the year and operate at very high utilisation levels in order to produce sufficient distillate to meet IMO 2020,” he said.
This is expected to pull in crude oil on large tankers into the refineries, more so than in H1 2019, and subsequently boost the product tanker trade from flow of distillate to where it is needed.
On the crude oil supply side, OPEC is expected to “return some barrels to the market” after the deeper than expected cuts in H1 2019.
Other highlights of the Teekay projection for the end of the year is for US oil exports to increase with two pipelines opening from the Permian Basin (shale oil production region) to the US Gulf coast ports, which could increase US crude oil exports to 4M b/d.
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