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Tuesday, April 24, 2018

MARKET INFORMATION

2000 – the year of Tankers

Year 2000 was the most remarkable year for the tanker industry we have seen since 1973. We attribute the main reasons for the fantastic freight rates to changes in chartering policies among main charterers in a period with tight tanker market balance and low oil stocks. The charterers’ reluctance to employ certain tankers has reduced their flexibility in the market at a time when it was most needed due to increasing oil demand and low oil stocks.  No doubt the consolidation in the market and in particular the emergence of large tanker pools have also contributed to a more orderly market and less chances of plunging rates due to lack of adequate market information.  The large tanker pools automatically obtain comprehensive market knowledge and will be less subject to manipulation than operators with limited overview of the positions in the market. 

The tanker market will never turn back to the old days.  Marginal owners who have survived by buying the cheapest ships, crews, flag, class, etc. and undercutting the rates of prudent owners, are squeezed out of the main markets.  However, the biggest danger in the tanker market will continue to be overbuilding and even if demand prospects look positive, there is still a great deal of uncertainty. The full impact of the 41 VLCCs delivered in 2000 will be felt this year and another 30 VLCCs are due for delivery over the next 12 months.  A cut in Middle east oil production seems necessary to balance oil demand, unless oil prices plunge and we see a strong stock building and a strong acceleration in scrapping.

Turning to facts and statistics, we saw peak freight rates for:

Product tankers, CCP/UNL Cont to USAC 33,000 cargo tonnes, WS 490, 27 December

Aframax, North Sea to Cont. 80,000 cargo tonnes, WS258, 20 October

Suezmax, W Africa to USAC 130,000 cargo tonnes, WS240, 29 December

VLCC, M E Gulf to Japan 250,000 cargo tonnes, WS185, 24 November.

For more information see

http://www.intertanko.com/pubupload/WS rates BITR.XLS

As the year started on a low level, the average time charter equivalents for the whole year appear more modest than the rates we saw during the second part of the year.  Still, dollar per day earnings more than doubled for most segments during the year compared to earnings in 1999:

http://www.intertanko.com/pubupload/Time charter eq. Fearnleys.XLS

The tanker fleet clearly increased during the year 2000. Clarkson estimates the active fleet to have increased by some 7 mil dwt.  Scrapping activity was high first quarter of 2000, but slowed down with increasing freight rates as usual and ended up at 14.8 mil dwt, almost 3 mil dwt below 1999.  However, whereas scrapping of VLCCs fell from 35 to 26 ships, scrapping of smaller ships increased from 81 to 100 ships. Average age of tankers scrapped was 26.7 years and 28.6 years for those 65 tankers below 50,000 dwt that were demolished. http://www.intertanko.com/pubupload/Scrapping.XLS

As usual, contracting increases with increasing freight rates and ordering in 2000 was at the highest level since 1973, when 105 mil dwt was ordered.  We have recorded some 37 mil dwt of orders in 2000, with a total of 258 tankers:

28 below 20,000 dwt,

12 of 20-35,000 dwt,

72 of 35-70,000 dwt

53 of 98-130,000 dwt, (only 2 of 120-130,000 dwt)

37 of 150-185,000 dwt

55 of 260-319,000 dwt (plus one ULCC of 440,000 dwt) see:

http://www.intertanko.com/pubupload/Tanker newbuilding.XLS

This has caused the orderbook to increase by some 12 mil dwt over the year:

http://www.intertanko.com/pubupload/Orderbook.XLS

 

North Sea production – peak moved further into the future - PIW

PIW says that once again, 2000 was expected to be the peak year for North Sea oil production. And again, that prediction seems likely to have been wrong. Thanks to expanding budgets and new fields, the North Sea production outlook for the next few years shows continued growth at least through 2002. For 2001, a PIW analysis indicates that output is likely to rise by about 0.160 mbd to 6.556 mbd, with 0.110 mbd from the UK (to 2.55 mbd), 0.060 mbd from Norway reaching 3.313, and 0.012 mbd from Denmark. The North Sea has long provided a testing ground for new upstream technology and business practices. In some sense, the battle between geology and technology has been fought there. It seems that every year, a peak is confidently predicted by the geological pessimists and then recedes. Yet, month by month, production results often disappoint the optimists, as old fields slide and new start-ups are delayed. (Petroleum Intelligence Weekly 01.01.01- PIW).

Plotting the way ahead

INTERTANKO Chairman Westye Høegh creates a tanker scenario for 2010 in an article in Lloyd's Shipping Economist December 2000

http://www.intertanko.com/pubupload/LLOYD004.DOC