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Prospects brighten for crude tanker market

Prospects brighten for crude tanker market
Italian broker Banchero Costa presents an upbeat assessment of prospects in the crude tanker market in its latest review.

The pace of deliveries of newbuildings is slowing considerably. Following record deliveries of 34.1m dwt in 2009 and 32.8m dwt in 2011, only 14.1m dwt was delivered in 2013, and no more than 10m dwt is expected this year.

Deliveries in all three sectors have been running at about half last year's levels. The aframax fleet is expected to shrrink marginally this year, suezmaxes to show no growth, and VLCCs to grow less than 2%. Demolition activity has slowed but is only slightly down on last year.

Earnings in November were encouraging, with suezmaxes topping $100,000 a day on some routes. Largely this was just a seasonal spike, but the market is visibly tighter than we have seen for years at this time of year, according to the broker. All three categories of large crude tankers have seen earnings of two to four times earnings last year on key routes.

“On top of this we have good news on the demand side, with the oil market well supplied, OPEC refusing to cut output, oil prices tumbling which should encourage consumption, price contango encouraging storage. The shift of import demand from the US to China/India, and on-off disruption in Libya, keeps encouraging longer haul shipments which is good for VLCCs and suezmaxes less so for aframaxes,” said Banchero Costa.

The US Energy Information Administration expects global consumption to grow 0.9m barrels per day this year, and 1.1m barrels per day next year.

From a tanker point of view, the good news is an increase in tonne-miles from changing global trade patterns. More oil from West Africa and South America is now heading for China and India as they try and diversify away from the volatile Middle East, while the US, awash with light and sweet domestic oil, is now considering its longstanding ban on exports.