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Monday, December 11, 2017

Volatility in the tanker market

Tanker spot rates have plunged for the second time this year. However, despite the decline, the situation is not dramatic as the average VLCC rate has still been above USD 60,000 per day for the first 10 weeks of 2005.

However the first dip to below USD 28,000 per day for a VLCC from the Persian Gulf to Japan, and the current dip to some USD 28,000 per day, both indicate that the market tightness has slackened since 2004.

Trade

VLCC average monthly spot fixtures

2001

2002

2003

2004

2005

AG - West

25

24

31

34

24

AG - East

54

45

57

64

63

AG - RS

3

4

2

3

3

Others

35

31

32

32

32

Total

117

104

122

133

122

According to Clarkson figures, VLCC spot activity was very high in January with 153 fixtures but fell to 89 in February giving an average of 121, about the same as the average for 2003 but considerably lower than that for 2004. 

The International Energy Agency (IEA) in its March report has raised the global demand forecast for 2005 for the 2nd time this year by 0.330 million barrels per day (mbd) to 84.3 mbd. Annual growth now averages 1.8 mbd. The revision is attributed primarily to very cold weather in late February and early March, a more robust view of U.S. economic growth and the impact of this and other factors on China's oil demand growth prospects. 

According to the IEA report, world oil supply rebounded by 0.885 mbd in February to 84.3 mbd. Non-OPEC supply added 0.445 mbd, with recovering North American and North Sea supply. Russian output rose after a four-month decline. Non-OPEC supply is revised up by 0.075 mbd in 2004 and 0.090 mbd in 2005. It averages 51.0 mbd this year, 0.925 mbd above 2004.  

OPEC February crude supply rose by 0.390 mbd to 29.0 mbd due to increases from Kuwait, Nigeria, Saudi Arabia and Iraq. The 2005 call on OPEC crude and stock change is revised up by 0.2 mbd to 28.6 mbd, versus 28.1 mbd in 2004. The revision is most pronounced in the first half of 2005, before higher non-OPEC output takes effect. 

The Organisation for Economic Co-operation and Development (OECD) industry oil stocks fell by 3 million barrels (mb) in January to 2573 mb, closing 66 mb above a year ago. 

The tanker market will continue to be tight but the uncertainty is whether the increased demand will be sufficient to balance the six to seven per cent increase in tanker supply this year. 

Contact: Erik Ranheim