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Product Tanker Demand Expected to Pick Up

The product tanker market is expected to recover over the summer period, although not at a pre-pandemic rate. In its latest weekly report, shipbroker Allied Shipbroking said that “we are now just a few weeks away from the start of the summer period. A period in which demand for clean petroleum products, such as gasoline and diesel oil ramp up, is traditionally nourished by increased travel especially in the USA and Europe. Refineries anticipate that this year will not be identical to the summer of 2020, when the pandemic had curtailed product and people mobility. US Gasoline demand last summer stood at about 25.26 million bpd, while in the respective period of 2019 it was 28.56 million bpd, while the same pattern was witnessed in Europe. In Germany, demand fell from 1.54 million bpd in summer 2019 to 1.45 million bpd last year”.

Source: Allied Shipbroking

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”.

Source: Allied Shipbroking

“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.

Source: Allied Shipbroking

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.

Source: Allied Shipbroking

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”.

Source: Allied Shipbroking

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

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