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Thursday, August 21, 2014

Research and Projects




Stock building and its effects

There was good activity in the tanker market in June and July. At least part of the reason for this was that, according to the Paris-based International Energy Agency (IEA), OECD commercial holdings replenished by 88 mb over the second quarter, the largest quarterly build since 3Q06 and equating to 0.970 mb. Over the first half of the year inventories rebuilt by 104 mb clawing back a large chun...... Login to view this article


Scrapping, decommissioning and conversions

The physical tanker fleet has been growing since 2001, as seen in the graph below, as the “blue mountain” of deliveries has been continuously larger than the stack of bars showing sales for decommissioning and conversions. The period of time when a large number of tankers were sold for conversion ended in 2010, but there are still some tankers sold for conversion, in particular for offshore...... Login to view this article


Period chartering

In line with spot freight rates, period contract rates have moved up for VLCCs and the suezmaxes so far in 2014, but on average remained fairly flat for the other ship sizes as the graph below shows. The below graph shows that the projected number of contracts based on the first seven months of 2014 has declined strongly for the smallest size segment, but remains fairly stagnant for the other...... Login to view this article


Net oil import

There is increasing tension in the energy markets due to various boycotts and hostilities involving the main oil supply areas in the world.   The above graph shows a good picture of the oil world. At the top we see the Middle East as clearly the biggest net oil exporter being more than twice as large as the second biggest net oil exporting area, the Former Soviet Union (FSU), which is, in turn,...... Login to view this article


Oil demand expectations downrated in 2014 but expected to accelerate in 2015

The Paris-based International Energy Agency’s (IEA) estimate for oil demand in 2014 was downgraded and trimmed by 0.130 mbd to 92.7 mbd this month following weaker-than-expected mid-year economic data. However, global oil demand growth is forecast to accelerate to 1.4 mbd in 2015 as macroeconomic conditions improve. Preliminary estimates show US demand rising to approximately 18.8 mbd in May, i...... Login to view this article


Implications of declining US crude imports and moderating Chinese imports for tanker demand

The crude tanker market has had a more positive period in last couple of weeks, but it is still hard to say whether this is a permanent upswing or whether it is temporary factors that are driving the market. There is great tension in the energy market and important structural changes are taking place. New oil is expensive, contributing to drive up oil prices to a level where the harder-to-produ...... Login to view this article


Middle East tensions and their impact

Hostilities and crises in the Middle East are not news; there have been continuous hostilities and crises going on in one or more countries in this area throughout history. The president of the Council of foreign affairs, Richard Haass wrote in the Financial Times mid-June: “The only thing certain is the old Middle East is disintegrating. The question is what will take its place?” A probable...... Login to view this article


Refinery development, product balance and trade

According the latest medium term report from the Paris-based International Energy Agency (IEA), global refinery crude distillation (CDU) is set to increase by 7.7 mbd until 2019, which is about the same as the forecast increase in demand of oil. Some 95% is expected to come from non-OECD areas and upgrading and desulphurisation capacity is set to increase by 5.1 mbd and 4.2 mbd respectively. Th...... Login to view this article


IEA forecasts reduced oil trade

The Paris-based International Energy Agency’s (IEA) medium term market report issued this week says that it is hard to overstate the degree to which the North American oil supply boom has defied expectations. The baseline Canadian and US oil production for 2013 was 0.330 mbd higher than expected last year, 0.42 mbd higher than forecast in 2012, 2.2 mbd higher than anticipated in 2011 and 3.21...... Login to view this article


Spotlight on suezmaxes

You will remember that last week we looked at the aframax market – this week we turn our attention to suezmaxes. The graph below shows that there is a strong correlation between the freight rates in the aframax segment and the suezmax segment. The trade routes for the suezmax segment, however, appear to be more diversified than for aframaxes. An increasing number of suezmaxes are also loading i...... Login to view this article


Call on OPEC oil up 1.3 mbd 3Q14

According to the Paris-based IEA’s latest Oil Market Report, global oil demand is forecast to rise by 1.3 mbd in 2014, to 92.8 mbd, a modest acceleration on 2013 as the macroeconomic backdrop improves. Global oil demand is set to increase sharply from a low of 91.4 mbd in 1Q14 to a high of 94 mbd in 4Q14. Chinese oil demand is projected to increase by 0.355 mbd to 10.446 mbd up from 10.091 mbd ...... Login to view this article


Spotlight on the aframax market

The aframax segment is the busiest tanker segment with almost 5,000 spot fixtures per year, or the same as the suezmaz and VLCC spot market put together. The fleet doubled between 1996 and 2011 and was steady for a couple of years but will probably increase somewhat both this and next year. There are still 17 aframaxes built in the 1980s left in the market, 72 aframaxes 20 years or older and 19...... Login to view this article


The changing energy market

Despite the world being to a great extent in turmoil both politically and economically, and despite a great deal of new oil that has been coming on to the market in the US, the oil price has remained remarkably steady for the past four years.  Average Brent oil price in 2011 was $111 per barrel, in 2012 $112, in 2013 $209 and so far in 2014 $208 per barrel.  This demonstrates the strong positio...... Login to view this article


A look at oil demand in 2014

The projected increase in oil demand for 2014 according to the Paris-based International Energy Agency (IEA) is 1.30 mbd. The graph below shows that 0.59 of the increase is in Asia Pacific of which 0.35 in China. Most of the remaining increases in demand are in oil producing regions, in particular the Middle East. The IEA has in its last monthly report upgraded its demand figures for 2014 due t...... Login to view this article


Moderate market prospects

Dave Saginaw, Commercial Director McQuilling Services LLC, gave a presentation to the INTERTANKO Council this week. In his presentation he stated that he expected tanker tonne-mile demand to be modest over the next few years - 1.5% for crude/DPP and 2.1% for CPP in 2014. The VLCC supply outlook was characterised as improving, with clean tanker supply rising strongly in 2015 and 2016 and a massi...... Login to view this article


The China Story

In the two previous Weekly News articles we looked at position of Russia and the US in the oil and tanker market. There is, however, no doubt that the biggest driver in the tanker market over the last 10 years has been China. The International Comparison Program, hosted by the World Bank, shows that China will overtake the US as the world’s largest economy later this year, a position the US has...... Login to view this article


US Oil –huge uncertainty surrounding production – import pattern changing

Future tight oil production in the US is the biggest wild card in the energy world at present. Long-term production forecast According to the latest long-term forecast from the US Energy Information Administration (EIA) its Reference case (see graph below) implies peaking production in 2016-2020, and then declining production for the rest of the period to 2040. However EIA’s High Resource case...... Login to view this article


Russia – an energy superpower

Russia is an energy super-power, the biggest oil and gas producer in the world and the biggest supplier of oil and gas to Europe. With this in mind, it is important to recognise that the oil production in the biggest world superpower, the US is set to surpass the oil production of Russia this year.   Russia has a vast, sophisticated energy infrastructure with export outlets in the Arctic, the...... Login to view this article


Deteriorating market balance?

The best news in the market at the moment is that the world economy appears to be recovering in rich countries such as the UK and the US. The International Monetary Fund (IMF) has virtually given these countries a clean bill of health and the US is again starting to act as a ‘locomotive’ for the world. Despite this the prospects for emerging economies, including China, have dimmed. China is usi...... Login to view this article


MR fleet expanding... but the same cannot be said of freight rates

According to Clarksons, clean MR earnings have on average declined in 2014 by almost US$3,000 per day to just over $10,000 per day. Last year 217 product tankers 10,000-60,000 dwt were ordered, mainly MRs, and about 10 new ones will be delivered every month both this year and next year. Some six owners have 10 to 40 tankers on order and another 40 owners have 2-8 tankers on order. According to...... Login to view this article


Erik Ranheim
Senior Manager, Research and
P: +47 22 122 675