In general, the news at the end of the year points toward a growing level of confidence in the tanker market
As 2018 ends, I perceive a general feeling of confidence flowing through the tanker market.
Positive signs include asset values on the rise across most sectors with, for instance, VesselsValue’s fixed age matrix up 14% for five-year-old VLCCs in 2018 over the same age vessels in 2017.
On the other hand, Clarkson Research Services report that earnings in the VLCC sector are still lower on average than in 2017. But a strong finish to 2018 (currently US$45,000/day) may pull that up to par with last year.
Another slightly less rosy view is that the market escaped from a 2018 that could have been much worse. The trade spat between the US and China left crude oil off the higher tariffs list, but China chose to import from elsewhere. Similarly, the latest OPEC meeting resulted in an agreement with Russia to reduce oil production, but with the US now in the role of swing producer, these cuts could be nullified.
More worrying is the continuing decline in the stability of Venezuelan crude oil production and export. It does not take a degree in political science to see that there will not be a happy ending and turmoil in the region is almost inevitable.
Swinging back toward the positives though, the latest Moore Stephens Shipping Confidence Index reports that confidence in the outlook for tankers is rising. More intriguing was the side question on expectations of the price differential between high sulphur fuel oil and IMO-compliant low sulphur fuel oil at 1 January 2020. The bulk of respondents fell into the US$175 to US$400/ tonne range, with some even as high as over US$550/tonne, far higher than earlier projections. I think there are going to be a lot of disappointed people in 2020.
To my mind, another key indicator of tanker confidence are shipbrokers. I do not mean the forecasts or analytics they produce, but the physical representation. Shipbrokers must set up shop where there is demand (or more realistically, where the client demands). Which is why the new SSY office in Madrid is another sign of rising confidence in the tanker sector.