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Saturday, November 17, 2018

Commercial analysis




Actual and forecasted fleet growth

This year fleet growth will be low, although new tankers will be delivered. Sales for decommissioning is also low, with only some 0.6 m dwt so far this year. This includes one VLCC, two suezmaxes and one old small aframax. The graph below assumes an acceleration in sales for decommissioning to 8.7 m dwt, compared to 7.7 m dwt in 2014. The number of sales for decommissioning is assumed to increa...... Login to view this article


Oil price realities impact the tanker market

The oil and tanker market entered into a new area with the halving of the oil price – a new condition in the market that so far poses more questions than answers. The period with above $80 per barrel in oil price lasted since September 2007, except with a sharp drop in 2008, only to recover above $80 again September 2010.       The average nominal Arabian Light oil price since 1970 has been som...... Login to view this article


Tanker freight spot and period rates

So what pays off best? Period contracts or working in the spot market? We have recorded period contracts over several years and the below graph shows a simple year average of the period rates for periods of six months and longer in different segments. The spot rates are taken from the Baltic International Tanker Routes (BITR) rates. For the whole period 2000-2015 period rates have been on avera...... Login to view this article


Tanker market driven by stockbuilding

A great deal of the oil transported over the past two to three months has gone to storage. Reuters reported China's crude oil stock build to be 0.194 mbd in November last year going up to 0.915 mbd in December. In 2014, China's total crude oil stockbuild was 111 million barrels, or an average 0.303 mbd, rising more than 31% year on year. China's crude imports in 2014 were up a sizeable 9.5% yea...... Login to view this article


Refinery expansion and marine fuels

Refinery capacity expansion up to 2018 is projected to be larger than expected increase in oil demand (see graph below for details). Both the Middle East and China may increase their product exports over this period because their refinery capacity will increase more than domestic demand for petroleum products. Four of the 14 Middle East projects refinery projects that today import products are ...... Login to view this article


Crude trade volume forecast to decline, but tonne miles to increase

The Paris-based International Energy Agency’s (IEA) medium term report projects oil demand to increase by 6.6 mbd over the period 2014-2020, which translates to a yearly average of -0.3% in the OECD area and +2.4% in the non-OECD area. Some 4.4 mbd (62%) of the increase in oil demand over the period is forecast to be in Asia, 1.4 mbd (20%) in the Middle East, 0.9 mbd (13%) in Africa and 0.6 mbd...... Login to view this article


Product tanker market

The products trade for tankers larger than 60,000 dwt has increased strongly over the last 10 years but seems to have stagnated and is now seeing a decline. Distances have increased in the products trades – average distance was 2,783 miles in 1994, 2,804 miles in 2004 and 3,604 in 2014, i.e. an increase of 28% since 2004. Products exports: The Middle East Gulf is by far the biggest products...... Login to view this article


Tonne miles down

A precondition for forming an opinion about the tanker market ahead is to try and understand what happened in the market in 2014. Average freight rates improved strongly last year, in particular at the end of the year. Tonne miles is probably the best measure for tanker demand and Lloyd’s List Intelligence has kindly provided us with figures for 2014. Improved freight rates in 2014 indicated a...... Login to view this article


Factors behind recent spike in VLCC rates

The spike in freight rates that started in October was stronger than anyone expected. This increased activity in the tanker market was to a great extent sparked by the plunge in the oil price. Brent Blend fell below $100 per barrel on 8 September last year and fell below $50 per barrel on 12 January. VLCC freight rates had increased from below operating costs last  June but we have since end...... Login to view this article


IEA revises down non-OPEC oil supply for 2015

The US-based Energy Information Administration (EIA) says in its oil market report (published 16 Jan) that steep drops in crude prices are only providing a limited boost to demand, as the price decline is itself at least partly demand-driven. The US is a notable exception. Recent data suggest that OECD demand has been falling by around 1% y-o-y through 2H14, as sharp declines in both power-sect...... Login to view this article


Breakdown of the world’s largest charterers

This week, INTERTANKO’s Senior Manager – Research and Projects, Erik Ranheim, takes a look at those chartering your ships. VLCC chartering dominated by Chinese charterers According to Poten & Partners, the Chinese charterers’ dominance in the VLCC spot market increased only marginally in 2014 compared to 2013/12. UNIPEC, PetroChina, CPC and Sinochem increased the number of spot contracts from 5...... Login to view this article


Rates on the up, but what exactly is driving the market?

It is not the basic fundamentals that are currently driving the market, rather it is speculation and a tendency to panic. The plunge in oil price and the strengthening of the dollar are setting a new and unfamiliar scene that is construed differently by the players in the market. Some use the opportunity to sell, others buy, while some speculate on the short-term effects and others take a...... Login to view this article


IEA downgrades oil demand outlook for 2015

The Paris-based International Energy Agency (IEA) has downgraded oil demand in its Monthly oil market report dated 12 Dec. We present the major points below. In the Monthly Oil Market report issued today (12 Dec) IEA says that the outlook for global oil demand growth for 2015 has been cut by 0.230 mbd to 0.9 mbd on lower expectations for the FSU and other oil-exporting countries. A strong dolla...... Login to view this article


Expect volatility as oil prices fall and tanker rates strengthen

The oil price continues to fall and tanker rates continue to strengthen – there is a dramatic development in the oil market and great uncertainty about the consequences.  No doubt it has had a tremendous effect on tanker rates, which are at their highest since end January 2010, when there was a short high peak in VLCC rates. The plunge in oil prices may both stimulate the economy and the oil...... Login to view this article


High rates, low activity for VLCCs

Despite a recent reduction, tanker rates had remained strong through November. This is in contrast to the low chartering activity noted by McQuilling Services, who reported only 79 fixtures on their selected VLCC routes, compared to 158 in October and 121 as an average for the year. Looking in more detail. McQuilling reports a 29% reduction in the AG to USG-Caribs fixtures but an 8-9% increase ...... Login to view this article


Surplus oil is of benefit to tanker owners

The tanker market is booming, the oil market is flowing over with surplus oil and the oil price is plunging on the day of a crucial OPEC meeting. No doubt the tanker market is benefiting from the surplus oil in the market, but in the longer run it is important where the oil is going – this information, though, is not yet publically available. The US has the most up to date information and we se...... Login to view this article


The speed, or otherwise, of the VLCC fleet

At a seminar attended by INTERTANKO in Oslo this week, Dr Ove Daae Lampe from Christian Michelsen Research AS presented his analysis of VLCC activity with data for the last three months using Automatic Identification System (AIS) data to map fleet activity. The above graph shows VLCC speed at one knot intervals. Some 26% of the fleet was not moving at this time, however, representing some 330,0...... Login to view this article


Oversupply of oil of benefit to tankers

Tanker owners are making money again as oil prices are the lowest in four years. The demand for oil is on the increase, but the supply of oil is seeing an even greater increase, and not just from the US and Canada. The Middle East, and especially Saudi Arabia, which traditionally has taken it upon itself to be the swing producer, is producing at full capacity and Saudi Arabia does not appear to...... Login to view this article


Spotlight on Russia

The market is charging on at record pace, and while we try to find out what is really going on we must take a look at the longer term oil market. The fall in oil prices, a boycotting of Russia, the slowdown in China, and a boost in US oil production are only a few of the issues the oil and tanker markets are facing. For now, we will look closer at the biggest oil producer in the world, Russia....... Login to view this article


How many VLCCs do we need?

The volatility in the market and the latest surge in freight rates, indicate that there is a limited surplus of tankers. It is however difficult to quantify this surplus. Nevertheless, we have carried out a trial for VLCCs. We have made a number of assumptions , but you can enter your own figures in the linked spreadsheet to calculate the result . For example a half knot increase in speed to 13...... Login to view this article

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Bill Box
Senior Manager, Commercial
P: +44 20 7977 7023