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Friday, December 15, 2017

Tonne-mile demand for crude tankers up 8% in 2003 – SSY

While a number of factors combined to create a very volatile tanker market in 2003, with rates rising to some of the highest peaks on record, it was the growth in oil demand that proved the main driver, according to the comprehensive SSY (Simpson, Spence and Young) World Oil Tanker Trends Volume 1 2004.

2003 saw a 34% growth in Chinese oil imports together with exceptional energy demand factors in Japan (due to nuclear plant outages), which meant far more oil travelling over longer distances to Pacific discharge areas than in 2002. North American trade disruptions of short haul Venezuelan supplies exaggerated the effect of increased cargo volumes on tonne-mile demand as replacement oil from further afield was shipped into the US. Despite a modest contribution from Europe, SSY estimates that tonne-mile demand for crude oil tankers on the major import trades grew by about 8% in 2003, as compared to a 5% decline in 2002.

SSY forecasts slower growth for 2004, although there will be positive growth in crude tanker tonne-mile demand as OPEC restricts the supply of long haul crudes and some of 2003’s extraordinary influences fade. In particular, Japan’s demand for oil seems set to drop as nuclear power generation gradually rises. With South Korea offering limited upside potential in 2004, crude oil import growth in the Asia-Pacific remains heavily dependent on a continued expansion in China. Factors that could mean upside potential are a consensus GPD growth forecast of 8.5% for China in 2004, the IEA’s projections for a 6.2% (0.34 mbd) rise in Chinese oil consumption, little potential for any rise in China’s domestic oil production, and the Chinese government’s desires to build its strategic oil stocks.

In sharp contrast to China, crude tonne-mile demand on the European trades has shown little overall change in recent years.

With already high refinery operating rates in the US providing a clear upper limit to crude oil use, the main upside to forecast US oil demand growth is the potential to add to current low levels of crude oil stocks. By contrast, rising oil demand in line with an expanding domestic economy at a time of high refinery utilisation does imply potential for further product import growth into the US.