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Sunday, December 17, 2017

INTERTANKO Tanker Event – Oil and Tanker Market session

The Istanbul Oil and Tanker Market session was ably and vigourously chaired by Herbjorn Hansson, Chairman and CEO of Nordic American Tanker Shipping.

 

David Martin, from the International Energy Agency’s (IEA) Oil Industry & Markets Division, said that world demand is now estimated at 86 mbd in 2007 (+1.3% over 2006) and is expected to average 87.2 mbd in 2008 (+1.5% over 2007). OECD demand has been sustained by North America, which will represent 53% of the total by 2012.  Non-OECD Asia demand will account for 47% of the total, including the Middle East for 19%. Non-OECD demand dominates growth and its share of world oil demand is expected to increase from 37% in 1991 to 45% in 2011. Demand growth will come from non-OECD countries –mostly China and the Middle East.

A usage shift is expected as growth will be fuelled by transportation fuels. Important points to notice will be:

·                Subsidies in non-OECD countries

·                Trend towards diesel, notably in Europe

·                Limited role for biofuels –less than 2% of demand by 2012

 

Looking at oil supply, the slow-down evident in the past decade continues. 68% of net non-OPEC growth comes from the FSU, notably the Caspian, Brazil deepwater, Canadian oil sands. Biofuels will rise somewhat while Mexico, North Sea and onshore/conventional oil production in US/Canada will continue to decline. Some 50% of expected demand growth has to be met with OPEC crude oil.

 

Erik Andersen from Oslo-based shipbrokers RS Platou, said that based on an underlying oil demand increase of 1.5%, increases in distances of 1.5% and a modest reduction in productivity, he expected tanker demand to grow by on average 4.5% 2007-2011.  Due to low oil inventories at the beginning of 2008, the high OPEC production level and record high oil prices, he expected demand for tankers to increase by 6% in 2008. OPEC is expected to maintain current high production levels as long as the oil price stays above $80 per barrel. Andersen also indicated that possible regulations to cut GHG emissions could result in slower steaming, but that this would increase demand for ships. He also indicated that oil output problems and slower economic growth could lead to significantly weaker demand growth for tankers.

 

Henry Curra, head of Research at London-based shipbrokers ACM Shipping, proposed a broadly bearish outlook for the product tanker sector as a whole. He foresees a decline in U.S. product import demand running well ahead of the country’s shrinking oil demand. He does however see China emerging as a major importer of gasoline and diesel, which should compensate for at least some of the loss of the U.S. as a driver of demand. Most worrying, however, is his view that the much anticipated development of a globalised product market, with long-haul exports flowing to Europe and the U.S. out of India and the Middle East, will fail to materialise. This would take some of the shine off LR2 and LR1 newbuildings built in anticipation of those trades.

 

Geir Olafsen, from Oslo-based shipbrokers Inge Steensland, said that we are in the fifth year of strong product fleet expansion, while demand growth is lagging. He believes that we could be heading for a balance towards in 2010. 

 

Contact: Erik Ranheim