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Friday, September 21, 2018

Market analysts meeting at INTERTANKO

On 2 June 2004 INTERTANKO hosted a tanker market analysts luncheon meeting at the Oslo office. Taking part were Jarle Hammer (Fearnleys), Erik M. Andersen (R.S. Platou), Ole R. Hammer (P.F. Bassøe), Hild Kinder (Carnegie), and Finn Engelsen (Lorentzen & Stemoco) with Erik Ranheim and Jan Svenne from INTERTANKO.

Erik Ranheim gave an introduction to INTERTANKO’s Research and Projects Section and concentrated on the following issues: single-hull tanker phase-out, OPEC oil production, China and US driving oil demand and shipbuilding capacity.

There was consensus that the single-hull tanker required phase-out according to MARPOL in 2004 and 2005 would be some 4 and 18 million dwt respectively, and for the tonnage of aframax size and upwards it would be only 1.5 and 10 million dwt respectively. Other numbers quoted in the market had a considerable range including some very high figures. It was thought that some may think “Category 1” (tankers without PL/SBT) includes all tankers built before mid-1982, whereas there are in fact 71 “Category 2” tankers totalling 4.8 m dwt that were also built before 1982.

Single-hull tanker phase-out in tables and graphs, under MARPOL, EU and OPA can be found on the INTERTANKO website.

Regarding the oil market the opinion was that the “terror” factor was adding 8-9 US dollars to crude oil prices and that the oil market in general was well supplied. In the short term, 2-3 years, there would be producers other than OPEC that could also supply additional barrels. In the longer term, 2007 onwards, the Middle EastGulf was the only place for additional supply. It was noted that apart from the US and Chinese oil import growth, there was virtually no oil import growth. The highest OPEC production ever was just under 34 mbd whereas the highest since 1990 was 29.5 mbd. OPEC’s April 2004 production was 27.8 mbd. US refiners appear to import as much crude as they can process as margins are very good at the moment. US finished gasoline stocks are seasonably low.

Erik Andersen questioned the reliability of the oil demand figures made by the different authorities and research institutes as for 2003 the forecasts for world oil demand differed by 1 mbd and for 2004 by 1.5 mbd. The 2004 forecasts for non-OPEC crude plus OPEC NGL (natural gas liquids) differed by 0.9 mbd meaning that the call on OPEC with no stock change differed by 2.4 mbd. Using the lowest and the highest OPEC production in Andersen’s VLCC freight rates model would imply rates ranging from USD 20,000-120,000/day.

For 2004 the tanker fleet may grow by as much as 7% compared with an annual growth of about 2-3% in the 1990-2003 period. The growth in oil trade, as measured in tonne-mile demand, may cover the fleet growth for 2004 but in the years ahead the amount of oil produced may be insufficient to cover such a fleet growth. The relatively high oil prices may dampen demand although the real oil prices adjusted for inflation are not high in an historical perspective. In many countries the crude oil price also represents a relatively small part of the end user price of petroleum products. Fleet growth in the panamax to suezmax segments will be the highest in the next few years. The tanker market may be fairly balanced until 2006 when the fleet increase may exceed the increase in demand as very few sales for decommissioning are expected.

South Korea, with the largest tanker building capacity and a currency advantage over Japan after the Asian crisis, is the current price-setter in the market. The high steel price accounts for much of the price increase although steel prices have softened somewhat lately. Some time in the future Chinese yards might become price-setters . After the current yard expansions have finished, productivity might increase considerably as expertise is taken from abroad, for example Korea.

Falling steel prices and reduced ordering might cause shipbuilding prices to fall in the medium term, but the current full orderbooks may cause newbuilding prices to rise further in the short-term.

Contact: Erik Ranheim