Tanker Market – Enjoy Being a Tanker OwnerJuly 19, 2015
The tanker market concluded the first half of 2015 successfully. Across all size ranges, spanning both crude and products the tanker market experienced strong earnings.
Oil demand is strong. Globally, it is likely to grow at or above 1.5% this year, resulting from growth in the OECD, The U.S. is particularly experiencing strong gasoline demand as we have seen refinery runs are close to record levels,
OPEC output is surging, In June, OPEC produced 31.7 million barrels per day (“b/d”) (Source: International Energy Agency (“IEA”)), This was led by Iraqi production, following by increased production in Saudi Arabia and the UAE. OPEC production was as the highest level in the past three years and well above the nominal quota of 30 million b/d. In its June report, the IEA also noted the market was massively oversupplied and stocks have been building at an “astonishing” 3.3 million b/d in the second quarter of 2015.
In the first half of 2015 VLCC deliveries only totaled 2.2 million million deadweight (“dwt.”). With few VLCC deliveries during this period and strong demand, VLCC earnings produced solid earnings for tanker owners (Note: Other sectors also benefited from deliveries that had little impact on the tanker market). While VLCC deliveries in the first half of the year had little impact on results in the first half of 2015, VLCC deliveries are expected to accelerate in the second half of 2015. In the second half of 2015, deliveries may total 5.7 million dwt. as tonnage ordered in 2013/2014 is delivered. We expect VLCC deliveries to have little impact on tanker earnings as Iran and OPEC production continues to support tanker rates. In the first half of 2015, 8 million dwt. have been added to the VLCC orderbook, representing 77% of the 2014 full year orderbook.
While one needs to monitor OPEC production as well as the orderbook to determine the intermediate and long-term outlook of the tanker market, at present and for likely the next 12 months, enjoy being a tanker owner.