The annual “Cargo Conference” hosted by the Association of Ship Brokers and Agents (ASBA) tanker market panel moderation of Navig8’ America’s Jason Klopfer, was full of insights not likely available elsewhere on the conference circuit.
On the prospects for larger sized tankers, panelist RJ Lyons, president of Baere Trading, tied to tanker logistics company and risk manager Mjolner Shipping, described the market as seeing “a full realization of vessel oversupply” after a “synthetic reduction in fleet supply” in 2014 and into 2015.
A theme pervading the two-day conference was the great changes that the maritime business has undergone in the past decade.
For smaller tankers, there have already been some sparks. Panelist Derek Solon, from International Seaways, the international fleet spun out of OSG, stressed the critical role of the US in clean product movements, including exports that were briefly disrupted by early September’s weather. Solon contrasted the short-lived spike in MR tanker rates in September with the post Hurricane situation in the mid 2000’s, when hurricane induced disruptions impacted the market for months afterwards.
Panel member Tom Nolte from Hartco Trading, an amalgamation of Oaktree Capital and what was once the Hess oil trading arm, amplified on some the sparks alluded to by Solon and the possible optimism for the product sector.
Nolte described the market for smaller tankers as “bouncing on a bottom” and “unlikely to get much lower”, as hires have impinged upon vessels’ daily breakeven levels. Looking ahead, he told the audience at the Miami Beach venue, “the next few months could be quite interesting” with some signs of an emerging shortage of products in the Atlantic Basin, related, in part, to supply disruption as a result of recent hurricanes. Following the disruptions with refining, he opined that: “the reaction may be delayed.”
Similarly, changes in trade patterns may be emerging in the crude oil trades, the type of “inflection point” that moderator Klopfer had implored the panelists to identify. Lyons noted that “distress in the US refineries has led to a wider price spread [of Brent over WTI oil].” He tied this oil price dynamic to emerging reports of record levels of US crude oil exports.
Panelist Lyons noted that US refineries are not all geared to run light sweet crude, typical of that from shale, so those barrels will continue to feed the export trend increasing ton miles or “more crude from the Atlantic going farther distances” in the words of Solon. But the panel members expressed caution overall about prospects for the large vessels, citing likely OPEC cutbacks which would reduce ton miles.