Tanker Market Looking for Direction Following Trump’s Election

A Trump return to office could bring with it significant change in the tanker shipping market, which has witnessed a structural change over the previous four years. Attempting to gauge the potential impact, shipbroker Gibson said in its latest weekly report that “with the stunning election of Donald Trump as the 47th president of the United States, energy and shipping markets are now frantically calculating the impact on their business plans. For tanker shipping, the president-elect’s support for the US oil sector suggests good times lie ahead. However, in reality the picture is far more complex, with a number of bullish and bearish outcomes depending on the policy decisions made”.

According to Gibson, “one of Trump’s boldest claims during his campaign has been that he would end the war in Ukraine “in a day”. How he might do this, and what that might mean for tankers is highly uncertain; however, there are several possible and potentially extreme scenarios. Should Trump end all support for Ukraine, somehow force a peace deal and lift sanctions on Russia, much of the tonne mile gain seen over the past 2.5 years could be under threat. How Europe reacts would of course be key and contingency plans are being discussed. Yet, if the President-elect succeeds, over time it could see the return of Urals and Russian diesel to the European market. What ships might carry these cargoes is debatable, but a sizeable shift away from “dark fleet” tonnage would be likely”.

The shipbroker also said that “on the other extreme, Trump could pursue a “maximum pressure” campaign against Russia, cancelling the Oil Price Cap and implementing full energy sanctions on the country in order to pressure Russia into a peace deal. Under such a scenario, many buyers of Russian oil, notably India would be forced to purchase more US, West African and Middle Eastern crude, shifting demand from the “dark fleet” to the mainstream tanker market. Such an arrangement might only be possible with cooperation from Middle Eastern producers, who may see the removal of Russian oil from the market as a route to higher production from the core OPEC members”.

Meanwhile, “Iran is another country likely to come under “maximum pressure”, although Trump will probably need to pick a priority, with stricter sanctions on both Iran and Russia at the same time likely to have too much of an impact on oil prices, unless of course support can be mustered from the other OPEC States. Although it is debatable how effective tougher sanctions on Iran might be, any reduction in Iranian exports would likely need to be replaced with non-sanctioned crude, again shifting demand away from the dark fleet. Trumps approach to Iran will be critical for his broader Middle East strategy before even mentioning his stance towards the Israel-Hamas-Hezbollah-Houthis crisis. Outside the region, Venezuela is another country which may well fall into Trump’s sights, although it would appear to be a lesser priority for now”, Gibson said.

The shipbroker added that “however, it is worth noting that oil prices fell following Trump‘s victory. Part of this was due to a stronger dollar, attitude towards climate change, but also his “drill baby, drill” motto. Yet, whilst the President-elect’s policies are likely to be supportive for the US hydrocarbon sector, he is unlikely to be able to meaningfully increase US production. His policies may also have global economic consequences, notably in China where a renewed trade war is possible. With Chinese oil demand already under pressure, tariffs could reduce demand further. It is worth noting that the majority of China’s oil demand growth is driven by LPG, ethane and naphtha; primarily for petrochemical production; a sector likely to be most impacted by a reduction in exports of consumer goods”.

Gibson concluded that “overall, there are too many twists and turns ahead, making it impossible to accurate predict the market impact. But for tankers, uncertainty creates volatility, and with that opportunity. So, strap in and enjoy the ride”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide