Not Logged In, Login,

Tuesday, December 12, 2017

Single-hull tankers marginalised as oil supply increases

The oil spill from the Hebei Spirit in South Korea has contributed to the further marginalisation of single hull tankers. We still have a fleet of some 80 m dwt single hull tankers, which represents some 20% of the total tanker fleet.

 

 

The only segments left with a sizable share of non-double hull ships are the smallest tankers (25%) and the VLCCs (27%). That may be a main reason why rates for the VLCCs have increased again after several charterers have expressed reservations about fixing single hull tankers in future.

 

It is conversion that has removed most of the double-hull tankers from the market. We have encountered problems in establishing how many tankers were actually removed for conversion in 2007. We have seen figures ranging from 13 to 45 VLCCs having left the market, and we have accounted for 21 ourselves. Several more have been reported sold for conversion but have still continued to trade. However, both the conversion activity and doubts over the use of single-hull tankers are contributing to reduce the supply of tankers.

 

On the demand side, many factors appear to have contributed to uncertainty in the tanker markets. These include the weakness of the US dollar, increased financial market speculation, ongoing geopolitical developments and perceived market tightness, as well as growing uncertainty due to the weak performance of non-OPEC supply, which became evident in 2007 in contrast to strong initial expectations. For 2007 non-OPEC supply growth is estimated to have averaged only 0.6 mbd, less than half the initial forecast of 1.3 mbd. There are various reasons for the relatively poor performance in non-OPEC supply growth in 2007, including project delays; deeper than expected and recurring unplanned maintenance; pipeline disruptions and the continuing decline in mature regions, as well as bad weather.

 

According to OPEC, in 2008 non-OPEC supply is expected to increase by 1.1 mbd to reach a level of 50.6 mbd. Gains in Russia, Azerbaijan, Brazil and the U.S. will more than offset expected losses in a number of countries such as the U.K., Norway and Mexico. The Former Soviet Union (FSU) will account for almost half the increase in non-OPEC supply growth. As many of the projects reported to be coming on-stream in 2008 are the result of delays from the previous year, there is an increased likelihood that they will materialise this year.

 

In contrast, OPEC crude oil production has risen steadily since the start of 2007, achieving a cumulative increase of 1.2 mbd despite a temporary decline in U.A.E. production in the latter part of the year due to heavy maintenance. By December 2007, OPEC crude oil output reached a two-year high of 32.0 mbd, while OPEC NGLs saw a significant cumulative increase of around 0.6 mbd to stand at 4.4 mbd. Taken together, this represents a more than 1.8 mbd rise in OPEC supplies since January 2007.

 

OPEC projects world oil demand to grow by 1.3 mbd in 2008 to average 87.07 mbd.

 

World oil demand

 

Area

Period

 Increase

 

 

2007

1Q08

2Q08

3Q08

4Q08

2008

Volume

%

 

North America

25.57

26.00

25.60

25.63

26.04

25.82

0.25

0.98

 

Western Europe

15.35

15.36

14.91

15.35

15.92

15.39

0.04

0.26

 

OECD Pacific

8.32

8.89

7.68

7.65

8.86

8.27

-0.05

-0.56

 

Total OECD

49.23

50.26

48.19

48.63

50.82

49.47

0.24

0.49

 

Other Asia

9.02

9.07

9.24

9.06

9.30

9.17

0.15

1.62

 

Latin America

5.41

5.34

5.47

5.65

5.58

5.51

0.10

1.85

 

Middle East

6.48

6.71

6.72

6.88

6.71

6.76

0.27

4.24

 

Africa

3.12

3.19

3.13

3.16

3.23

3.18

0.06

1.81

 

Total DCs

24.04

24.30

24.57

24.76

24.83

24.62

0.58

2.40

 

FSU

3.97

3.91

3.76

4.05

4.37

4.02

0.05

1.38

 

Other Europe

0.94

1.04

0.96

0.93

0.93

0.96

0.03

2.90

 

China

7.60

7.82

8.13

8.20

7.84

8.00

0.40

5.27

 

Total Other Regions"

12.50

12.77

12.85

13.18

13.14

12.98

0.48

3.86

 

Total world

85.77

87.32

85.61

86.57

88.79

87.07

1.30

1.52

Source OPEC

 

Contact: Erik Ranheim