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Although BIMCO expects the tanker fleet to keep growing, the continued severity of the market conditions has not improved the situation for the owners and a short-term rate recovery is not expected. In a recent analysis, Mr. Peter Sand, BIMCO’s Chief Shipping Analyst, explains the latest developments of demand and supply in tanker shipping, concluding why a record poor tanker market with a growing fleet is prolonging the crisis.
Mr Sand says that growing Chinese crude oil imports (up 5.8% during the first half of 2018) improved crude oil tanker demand, but obviously not enough, as other elements are pulling the market in the opposing direction. It remains a fact, however, that global oil demand is growing constantly, and so is global tanker demand.
Fortunately, the introduction of a tariff on 10 million tonnes of crude oil exports from the US to China was avoided at the very last minute. If China decides to source its import demand for sweet crude by going to West Africa, shorter sailing distances will hurt earnings. BIMCO does not expect crude oil to re-enter the trade war after it has been removed.
Considering the market condition in the supply, BIMCO’s fleet growth forecast for the full year of 2018 is at 0.8% for the crude oil sector and 2.4% for the oil products sector.
After a surprisingly high number of new orders emerged during the challenging first half of the year, there were no new orders for crude oil tankers in June. Looking at BIMCO’s delivery forecast, a halt in contracting is long overdue. It is already clear that the industry must keep demolition activity high well into 2019, to avoid a worsening of the fundamental balance.
Concluding, Mr. Sand notes that a short-term rate recovery is not expected, as it is ‘maintenance season’ for the global refining industry in September/October – mostly the part of it located in the OECD countries (mainly the US, Europe, Japan and South Korea) and Russia – as they repair and prepare the facilities for the winter specifications of the refined oil products.
From an operator perspective, chartering in a ship with a scrubber installed onboard is a hedge against rising bunker fuel costs after 1 January 2020. From an owner perspective, chartering out a ship with a scrubber installed means a significant premium on the T/C rate, which, in turn, pays for the scrubber.
Overall, global oil demand remains healthy. During the second half of 2018, BIMCO expects freight rates to go up from the very low levels seen up until now.
For crude oil tankers to really enjoy solid earnings, however, patience is required, as overcapacity is currently significant. The fundamental balance could worsen in 2019 if demand growth does not pick up, as the fleet could grow by 2.5% unless extensive demolition activity continues. Mr. Sand explains.
View full BIMCO analysis by Mr. Peter Sand as well as related graphs explaining the outlook for tanker shipping here[/et_pb_text][/et_pb_column]
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