MSI is already expecting tanker time-charter earnings over the course of 2020 to decline as the earlier impetus from IMO 2020 and sanctions faded.
“Tanker markets are already seeing substantial downside, with sharp declines in spot markets after a strong start to the year,” commented Adam Kent, managing director of MSI.
“The IEA have stated that global oil demand is likely to contract in Q1 2020 as a result of the coronavirus, the first time this has happened since 2009. China’s oil demand is experiencing severe shock and could drop by more than 3m barrels per day in February,” Kent said.
China accounts for about 14% of global trade as estimated by MSI. Net growth in global crude imports was effectively flat last year while China saw an increase of 8.9%.
“This year will be markedly different with Chinese refiners cutting throughput substantially in Q1, although our base case view is that conditions will normalise in Q2. Until then, vessel earnings will continue to decline across Q1,” Kent said.
With the impact of coronavirus not just be in China itself and oil prices having fallen by around 15% between mid-January to mid-February, Opec may decide to take more substantial action when they meet in early-March.
“Against a backdrop of plummeting Libyan exports, as well, crude cargo volumes will be under pressure across first half of 2020 as a result,” Kent said.
“What we have seen so far from coronavirus is an escalation of these trends, with further downside risk if there is further escalation,” he added.
Read all Seatrade Maritime News coverage on the impact of the coronavirus on shipping
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