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Oil tanker fleets to profit from increasing demand — Analysts

Rising demand for oil is expected to drive increases in tanker traffic in the coming year, analysts said.

Oil demand in the third quarter is estimated at 94 million barrels per day, up 10 per cent from the second quarter Enrico Paglia, a Genoa-based senior analyst with Banchero Costa, a shipping brokerage and consultancy, pointed out.

Tankers have been suffering from falling traffic and weak rates, according to Lloyds List. Saudi Arabia’s decision to cut output by 1 million barrels per day is, however, expected to lead to the exhaustion of current inventory.

“Oil demand has rebounded from the trough in the second quarter, but oil production has not,” Oslo-based Arctic Securities senior analyst Ole-Rikard Hammer noted.

“This means that the inventory overhang, which is keeping a lid on any meaningful recovery in freight, is disappearing very fast, he said. The US crude inventories, Hammer points out, are falling twice as fast than the previous record.”

VLCC tankers, which can carry 2 million barrels of crude oil, saw earnings on the key Persian Gulf-North Asia routes almost double between end-November and mid-December to around $15,000/day, according to brokers’ estimates.

Increasing demand for oil from China is also expected to improve demand for tanker traffic.

Over the last three years, China has increased its refining capacity, implying larger potential to import crude, Olivia Watkins, head cargo analyst at UK-based shipping consultancy, VesselsValue, said.

China is expected to add 440,000 barrels per day, or 22 million metric tonnes per year of new capacity in 2021, in addition to the 260,000 barrels per day projected to come online in 2020, Platts data cited by International Shipping News showed.

The recovery is expected to pick up speed as the coronavirus crisis hopefully comes under control and there is plenty of pent-up consumer demand, Hammer said. Hence, crude producers and refineries will boost supply as prices return to acceptable levels, which in turn will flow down to higher demand for tankers, he said.
Source: Cyprus Mail

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