For 2021, scheduled deliveries are more than double the 2020 numbers and even though delays are expected with a pickup in scrapping this year, the outlook remains bleak.
“The tanker fleet has grown in 2020 with the delivery of 36 VLCCs, 29 suezmaxes and 18 aframaxes/LR2s. Ten panamaxes/LR1s and 63 MRs were added to the fleet as well. While these are by no means record deliveries, there was a significant drop in oil transportation demand and only very limited scrapping,” Poten & Partners wrote.
“The main underlying reasons for the weak start of the year are clear: low tanker demand combined with too many ships. Oil and tanker demand will remain challenging, at least through the first half of 2021 and maybe longer.”
In many countries, the Covid-19 pandemic is worse than it has ever been and some governments have reinstated travel bans, dampening oil demand. While several vaccines have been approved and production is starting to ramp up, the rollout of the vaccine is much slower than anticipated.
“Oil demand is still 4-6 million bpd below pre-pandemic levels and analysts don’t expect global oil demand to return to 2019 levels until sometime in 2022. We expected oil demand growth to be fairly slow in the first half of 2021, with possible acceleration in the second half of the year,” Poten & Partners stated.
An additional negative for the tanker shipping market is the overhang of floating storage. The number of ships utilised for crude oil and refined product storage has declined gradually since it reached a peak in the summer of 2020. The release of floating storage cuts back transportation demand and adds tonnage to the market.
“Oil supply may not come to the rescue of the tanker market, as Opec+ remains remarkably disciplined, and non-Opec producers have limited spare capacity to bring to market,” Poten & Partners said.
Some earnings, particularly in the crude oil segment, are tiptoeing on negative territory. Poten & Partners noted that VLCCs, suezmaxes and aframaxes have all shown negative TCE earnings on one or more of the benchmark routes.
“2021 is not off to a great start. Usually the winter months are good for tanker rates, but not this year. A review of the daily market rates shows low Worldscale assessments, which lead to very low TCE earnings,” the analyst said.
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