Product Tanker Demand Expected to Pick Up
According to Allied’s Reserach Analyst, Mr. Yiannis Vamvakas, “the mounting number of vaccinated people and the gradual return to “business as usual” in the West has pushed refineries towards the belief that this summer will be different. In the US, the expected rise in GDP during summer months is expected to reach 8.5% compared to last year, promising a much higher availability in both disposal income and consumer expenditures, while at the same time backing the improved sentiment that is already being seen. According to the EIA, highway travel is expected to increase by 15% during this summer’s driving season”.
“However, the upsurge that will eventually be noted in gasoline demand will be curbed due to the lower mobility as part of the still increased percentage of work-from-home seen since the outbreak of COVID-19. The same trend is expected to be seen for diesel oil as well, with the effect of the pandemic though being less severe as illustrated by their data. Local refineries have already increased their intake and plan for an increased production of motor gasoline, compared to the respective period of 2020.
In Europe, the fundamentals in most key economies are also pointing in the same direction, as confirmed by indices such as retail sales and industrial production, which albeit marginally, have started to note an improvement”, Vamvakas said.
Allied’s analyst added that “the latest data shows that crude oil intake by domestic refineries in Europe increased 2.5% on a y-o-y basis, while gasoline stocks in most European countries have declined. The EIA forecasts that total liquid fuel consumption in Europe will rise during this summer by 5.4% y-o-y. However, the anticipated improvement in demand within the major economies of Europe and the US is likely to be at least partially counterbalanced from the worrying situation in Asia and especially India, where the pandemic crisis seems to still be causing serious disruptions.
At the same time, demand outlook for another key product, namely jet fuel, is not looking as bright as the rest. It seems that uncertainty regarding the pandemic situation is still present and airplane travel is still a less attractive option for the timebeing. Jet fuel stocks in Europe and the US have increased compared to pre-pandemic levels. The number of commercial flights may well have followed a rising trend within 2021, but the numbers are still far behind 2019 figures”.
Vamvakas concluded that “clean product tankers have seen their earnings plunge since the 2nd quarter of 2020. The overall drop in demand and the current state of the global fleet has had as a result an increase in the numbers of owners facing pressure from negative PnL accounts. However, it seems that we are now close to a bottom in the market with expectations depicting a gradual rise in the number of enquiries for cargo movement during the summer months. We should always keep in mind though that things can always be led astray by unforeseen “surprises” which will eventually form the market balance and given that COVID-19 is still very much in the picture, we should remain cautious”, Allied’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide