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Tanker Market: Recovery is a Matter of When, not If

The tanker market is expected to start recovering, in line with a demand growth in the crude oil market. In its latest weekly report, shipbroker Allied Shipbroking said that “a slight reversal in the prevailing trend has been witnessed in the crude oil freight market during the last couple of weeks. It is undoubtedly too early to speak of any “recovery”, but it is worth examining if these are signs of the much-touted promise of an improved 3rd quarter, or if it is just a temporary mini rally. Before digging into the consumption and demand levels of many of the world main economies, it should be stated that all eyes are now fixed on the OPEC+ meeting that will take place on July 1st. Given that oil prices have already reached their highest point since 2018, driven by an improvement in demand, the decisions of the cartel will be crucial for the prospects of the market over the coming months. The discussions will focus on the easing of output cuts that had been decided due to the pandemic”.

According to Mr. Yiannis Vamvkas, Research Analyst with Allied, “expectations are that the organisation will announce an increase in production, bolstered by the healthier demand outlook. However, this rise is likely to be minor, keeping prices stable. Meanwhile, rumours have emerged as of late regarding the potential lift of sanction on Iran, a fact that could cause a soar in the total crude oil output significantly. Nevertheless, the latest news state that US officials remain reluctant on this scenario. The enhanced demand mentioned above is mainly powered by the robust recovery of the Western economies”.

Source: Allied Shipbroking

“In the US, the EIA announced last week that commercial crude oil inventories fell by 7.6 million bpd, reflecting a rise in consumption in the country. Additionally, the total gasoline inventories also fell during last week, while the production of the commodity in the country rose to 10.3 million bpd. The soaring mobility and the return to “business as usual” have now started to be apparent, boosting confidence in the market. Another indicative figure, the number of active US oil rigs, is also pointing in the same direction, as they are now 470, approximately 77% higher compared to last year”, Vamvakas said.

Allied’s analyst added that “on a global stage, the EIA forecasts that the strong manufacturing rebound, and the increased cargo transport will lead the global oil consumption to reach 97.67 bpd in 2021 from 92.26 in 2020, while it is expected to surpass the 2019 demand levels during 2022 reaching 101.3 million bpd. These numbers are based on the assumption that the deployment and the effectiveness of the vaccines will resume without any new resurgence in the global number of COVID19 cases. In Asia, the top net importer of crude oil, China has announced that total oil imports during the first 5 months of the year have reached 220.5 million tonnes, with a slight slowdown in the trend noted as of late due to the high prices, which has diverted consumption over to the past built-up inventories. Meanwhile, the refinery throughput in the country has also boosted during the Jan-May period by 12% compared to the respective period of 2020. China is not the only nation in Asia that has seen oil consumption rise, as other countries, including India have seen demand recover and climb to even double-digit rates as of late”.

Source: Allied Shipbroking

Vamvakas concluded that “the crude oil tanker owners have passed through a prolonged period of challenging freight rates. The pandemic caused a severe drop in global demand levels, leaving several tankers unfixed or charted at rates even below OPEX. This economic cycle though should have a bottom, from which the market will start to rebound. The question is not a matter of if but when. The first signs of such a shift seem to have emerged, but the fragility of the global economy is still prevalent. However, market participants are more optimistic now than at any point during the last couple of years”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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