Euronav: US$100M war chest for post-2020 'fuels strategy'

Looking ahead to Q4 2019, Euronav’s quarterly report argued that vessel supply was the most important factor in the tanker market and commended owners’ ordering restraint.

Only one VLCC has been ordered so far in 2019.

Looking longer term, Euronav believes this restraint will continue due to uncertainty regarding fuel propulsion systems and the fuel required to meet IMO greenhouse gas targets. Along with many owners, Euronav has to justify its decisions to shareholders and avoid the “stranded assets” scenario.

On the demand side, Euronav’s quarterly report noted “Demand forecasts have weakened modestly over 2019 with the three core agencies (IEA, EIA and OPEC) cutting 2019 demand growth forecasts from 1.4M b/d to 1.2M b/d. It should be noted that this remains above the long-term trend growth average of 1.1M b/d (since 1990).”

The company also noted that secondhand prices for modern VLCCs and Suezmax tankers are back up to Q1 2016 levels.

As Euronav’s report said ”… prospects give encouragement for Q4, refinery production is anticipated to return to higher levels for this period ahead of IMO 2020’s introduction in January next year. US crude export growth continues and the recent mark of 3.9M b/d in June reflects that infrastructure bottlenecks are being overcome.”

The report also cited the unknown impact of VLCC and Suezmax tanker supply leaving the fleet to undertake eco technology retrofits (scrubbers or ballast water treatment systems) to meet IMO regulations.

The report revealed a handy reference point for other VLCC and Suezmax operators: Euronav VLCCs in the Tankers International Pool have earned an average of US$26,600 per day and its Suezmax tankers US$15,800 per day so far in Q3 2019.