Strong activity in the tanker market

There has been tremendous activity in the tanker market this winter as world oil demand passed 80 mbd for the first time ever in the fourth quarter of 2003. The fastest growing part of the global oil supply has been non-OPEC production, which has increased by 14% since 1995 and is expected to pass 50 mbd in 2004 - about double OPEC’s production. Non-OPEC production overtook OPEC production as far back as 1977 when OPEC was producing some 31 mbd. Since that time, non-OPEC production has increased continuously, except for a set-back in the mid-1990s, whereas OPEC production declined sharply until the mid-1980s and then increased slowly to reach a maximum of 28 mbd in 1997/98 before declining again.

The strong tanker market activity is reflected in VLCC fixture activity. The demand for OPEC oil was expected to decline in the 4th quarter of 2003, but OPEC increased production and the number of fixtures increased, hitting a second high point in October, just at a time when VLCC availability was on the low side, due partly to a record number of 195 VL-ULCC spot fixtures worldwide in August of which an unusually high numberwere AG/West fixtures. This high level of activity in August, with more VLs than usual fixing long-haul AG/West, and then again in October when many of the August AG/West VLs were re-fixed from West Africa instead of ballasting back to the Middle East, kept VLCC availability low and helped spot rates into their current upswing. Subsequently the beginning of 2004 has been helped by the already high West African activity increasing still further, at the same time as Middle East fixtures also increased.