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Wednesday, September 26, 2018

Strong demand growth

According to the Fearnleys Review, tanker demand in tonne miles increased by 6% in 2003, double the increase in 2002. As the numbers for tonne-miles do not say much by themselves, we have created indices for Fearnleys’ figures for tonne miles, tonnes and average distance since 1973. It can then be seen that the growth rate in 2003 was the strongest since 1991 when trade increased by 8% compared to the previous year. In the meantime the average growth rate has been only 1%, with negative growth in 2001 and 2002.

Whilst the crude volumes transported have increased, the average actual distance covered has remained rather steady over the last 10-15 years - just over 70% of what it was when more oil was being transported from the Middle East to Europe in the 1970s. Tonne mile demand in 2003 was 18% above the 1994 level, whereas the fleet in 2003 was 8% over the 1994 level.

Fearnleys projects crude tonne miles to increase by a healthy 2% in 2004, but at the same time the fleet is projected to increase by 6%. The slowdown in the tonne mile development is due to more short haul oil entering the picture, in particular from Russia.

Non-OPEC oil production is projected to increase to 50.9 mbd in 2004, or some 64% of supply, up from 49.7 mbd or 61% of supply in 2003. It should also be taken into consideration that more shorter haul OPEC oil may come on the market in 2004 from Iraq via Ceyhan and from Algeria, which has produced 1.13 mbd in January 2004 compared to an average in 2003 of 0.85 mbd.

Projected changes in oil supply demand 2004, Source: IEA

Oil demand increases


Oil supply increases

Demand Area



Production Area





L America





N America







Middle East





Other Asia



Net other non-OPEC


N America













At the same time the fleet increase has been rather moderate - until now. However, the fleet over the next couple of years is projected to increase more strongly than in recent years, because there are very few larger tankers left that were built in the 1970s and the beginning of the 1980s which must to be phased out and which could counterbalance newbuilding deliveries. Fearnleys projects a fleet increase from 279 m dwt at the start of 2003, to 290 m dwt at the start of 2004 and to 307 m dwt at the start of 2005. The orderbook is building up for 2007 deliveries and we recorded more than 50 contracts of some 4.3 m dwt in January and just under 22 contracts of 2.7 m dwt up to 17 February.

Sales for decommissioning have naturally been low in the very strong tanker market and INTERTANKO has recorded just two aframaxes, one suezmax and one VLCC/FPSO sold for decommissioning in the first seven weeks of 2004. The number of trading large tankers required by regulation to be decommissioned in 2004 is, according to our records, 2 VLCCs, 5 suezmaxes and 14 aframaxes. Since Category 1 ships basically have to be removed before April 2005, there may well be more tankers taken out this year than have to be phased out. While there is also some uncertainty over possible conversion to PL-SBT for Category 2 tankers, according to our records, the number of trading larger tankers required to be decommissioned in 2005 comprises 14 VLCCs, 15 suezmaxes and 62 aframaxes.