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Oil Price Dynamics in Favor of Spot Tanker Demand

Spot tanker demand is expected to benefit from the latest oil market price dynamics. In its latest weekly report, shipbroker Intermodal said that “the turbulent dynamics witnessed in oil markets during the five months of 2024 have had a direct impact on crude freight demand fundamentals. Volatile crude prices, coupled with fluctuating supply and shifting trade flow patterns, dictate the volume of shipments and corresponding tonne-mile requirements for crude tanker operators. As we head into the second half of the year, several key factors are emerging that will influence the trajectory of tanker demand through the remainder of 2024”.

According to Intermodal’s Research Analyst, Ms. Chara Georgousi, “as of mid-2024, the crude oil market has demonstrated significant volatility, influenced by geopolitical tensions and fluctuating supply dynamics. In Q1, Brent crude oil prices averaged $82/bbl, supported by OPEC+ production cuts and robust demand from emerging Asian markets. Geopolitical tensions in the Middle East caused temporary supply disruptions, spiking prices close to $90/bbl by late March. Increased production from the US and Brazil kept prices rangebound by April, amid strong demand from transportation and aviation sectors as global travel recovered”.

Source: Intermodal

The shipbroker added that “the sentiment for oil prices during the remainder of 2024 appears mixed, according to analysis from various sources. Citi expects Brent to fall to $74/bbl in Q3 due to looser fundamentals and easing geopolitical risk premiums. However, potential OPEC+ cuts and slower non-OPEC supply growth could maintain market balance. The IEA projects Brent to average around $77/bbl in the 2H of 2024, while Goldman Sachs forecasts a slightly higher average of $80/bbl due to potential supply disruptions and stronger-than-expected demand recovery”.

“Meanwhile, on the demand side, growth projections for 2024 vary significantly between major organizations. The IEA has trimmed its forecast, now expecting global oil demand to grow by 1.1 mbpd, largely citing weak demand in developed OECD nations. This contrasts with OPEC’s expectation of a 2.25 mbpd increase, highlighting a significant divergence in outlooks. The IMF’s upwardly revised 2024 GDP growth forecast of 3.2% provides an offsetting factor, though scenarios from other organizations present varied outlooks. For instance, the World Bank maintains a cautious stance, suggesting that slower-than-anticipated global economic recovery could limit oil demand growth to 1.5 mbpd”, Georgousi added.

Source: Intermodal

“The current backwardated market structure, with prompt prices higher than future prices, emerges as a supportive factor for tanker demand dynamics. It incentivizes moving crude quickly to capture prompt price premiums over future prices. This results in stronger spot tanker demand but limits opportunities for floating storage that contributed to tanker earnings previously. Moving forward, if backwardation persists, robust spot demand is likely to continue, keeping spot tanker utilization high and maintaining upward pressure on freight rates. However, shifting trade flow patterns, potential risks to OECD oil demand, and the evolving Red Sea crisis bear monitoring for their impact on tanker tonne-mile requirements”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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