McQuilling Services has released its 2021-2025 Tanker Market Outlook. This 185-page report provides a detailed analysis of the tanker market supply and demand fundamentals outlook to 2025
The McQuilling Services 2021-2025 Tanker Market Outlook covers oil fundamentals, global economic and geopolitical context in addition to tanker demand and supply projections across eight vessel classes. The interaction of tanker demand and vessel supply variables is processed using advanced quantitative modelling to produce a five-year spot and time charter equivalent (TCE) forecast for eight vessel classes across 24 benchmark tanker trades, plus four triangulated trades.
Also included in the report is a robust five-year asset price outlook and a one, and three-year-time charter rate forecast through 2025.
The report discusses the regulatory and shipbuilding environment around decarbonisation and the implications from current IMO guidelines in addition to a series of global themes shaping the markets.
Following a historically volatile year, McQuilling Services sees crude oil fundamentals under intense pressure entering 2021 as economic activity remains subdued, although the expectation for a sustained, but gradual recovery remains intact.
Traditional tonne-mile demand growth is projected to increase by 5.0% for VLCC tankers this year; however, including demand changes from the unwinding of floating storage, McQuilling Services’ models reveal a 12.5% reduction year-on-year, and down 5.1% from a more normalised 2019 baseline.
On the product tanker side, McQuilling Services sees demand for tankers transporting refined products finds substantial support from increasing utilisation of refinery capacity in the Middle East, whereby gasoil and jet fuel find growing export opportunities to the west and notably Europe. Product supply, particularly northern Europe may come under pressure from regulatory shifts and fuel switching.
McQuilling Services finds the Middle East naphtha balance coming under pressure from shifts in refining yields, suggesting longer-haul movement to Asia from west of Suez export areas.
MR tanker demand is projected to be supported by activity between the US Gulf and Latin America, while refinery closures in the Australia/NZ region underpins growing demand in the east, where additional positive factors emerge, including robust growth from the Middle East-East Africa.
Looking at the crude oil tanker fleet growth, when measured on an average inventory basis, McQuilling Services expects it will grow 1.2% in 2021, despite its projection for 94 crude tanker deletions this year.
The net fleet growth in 2022 and 2023 will continue to trend near 0%, despite a flurry of contracting transpiring in H2 2020 as a reaction to attractive newbuilding pricing.
The report sees long-term projections for vessel deliveries point to a cyclical delivery peak in 2024/25, which supports McQuilling Services’ view of a deteriorating earnings profile in 2025.
McQuilling Services sees fleet growth for product tankers is anticipated to reinforce support for freight levels and earnings over the forecast period, as the under-ordering of LR tankers in recent years shows a manageable addition profile in 2021/22, aided by an expectation that deletions will increase in those years.
McQuilling Services expects moderate pressure from switchover candidates. MR net fleet growth is anticipated to decelerate between 2021 and 2023 from historical observations, before a notable rise is predicted towards the end of the forecast period.
In consideration of the demand and supply fundamentals uncovered in its analysis, McQuilling Services project spot market earnings for VLCCs to average US$9,400/day in 2021 on a non-eco, no scrubber basis. The peak year for VLCC spot market earnings in the McQuilling Services’ model has been pushed out to 2024 at US$39,500/day, while Aframaxes are projected to return US$6,800/day in 2021 before taking a similar course.
The years 2022 and 2023 reveal improving fundamentals for crude tankers, report McQuilling Services, although it is sceptical that crude oil tanker earnings in 2022 will fare significantly better than the 2018 market.
The findings from McQuilling Services’ analysis show a more promising balance of fundamentals in the refined product tanker segments of the market.
The strong demand recovery anticipated from core product balance mismatches, along with relatively light increases on the supply side will support non-eco spot market earnings on triangulated voyages for LR2 and LR1 tankers, averaging US$17,100/day and US$15,900/day, respectively, over the first two years of the forecast period.
The MR2 segment is projected to average US$14,200/day over the forecast period, with non-eco consumptions, and the 2022-24 period reveals significant strength, following a challenging 2021.
The McQuilling Services’ 2021-2025 Tanker Market Outlook can be purchased online at www.mcquilling.com/reports.
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