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Euronav Looks to 2019 For Turnaround in Shipping Market After Last Year’s Challenging Market Conditions

Euronav NV reported its final financial results for the full year to 31 December 2018.

Paddy Rodgers, CEO of Euronav said: “For most of the year Euronav faced one of the most difficult and challenging freight markets the tanker industry has experienced in recent times. A combination of reduced cargo supply from self-imposed OPEC production cuts and excess supply of large tankers provided sustained downward pressure on freight rates until the final quarter of the year. The difficult trading environment had the benefit of driving a rebalancing between vessel supply and demand with fleet maturity which we believe has now returned to longer term averages. In our view, the recovery in freight rates during Q4 and into 2019 indicates the dynamic between supply and demand is near equilibrium.”

Image: Euronav

According to the IEA, global oil demand growth will remain at relatively strong levels in 2019, with the average daily oil demand surpassing 100 million barrels per day for the first time. Incremental demand will come predominantly from China and India, but also from the US. Another important contributor to incremental supply in 2019 is Brazil, where delays to a number of projects that were due to commence production last year have pushed the incremental barrels into 2019. This geographical imbalance of incremental demand and supply is positive for the crude tanker markets as long haul travels will take capacity out of the market with a tightening effect.

In terms of fleet growth the first half of 2019 is expected to see a large influx of newbuildings in the VLCC segment, while the Suezmax market is expecting a more moderate newbuilding programme. We believe that a number of market factors will help to absorb these new ships, such as increased demand for large tankers due to the expansion in US exports, vessels going into countercyclical dry-docking to retrofit scrubbers, and that there is a potential for an increased number of vessels going into storage as the market prepares for the IMO 2020 deadline. Recycling activity is also anticipated to continue in 2019 as the global fleet age is now back to longer term average levels.

All things considered, 2019 is expected to present a turning point in the freight market. The market appears to be reaching a point of equilibrium in terms of fundamentals with tanker owners able to benefit from the freight rate improvements that a more balanced tanker market tends to present.

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Source: Euronav

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