Tanker Market’s Rebound is Still Far Away

The tanker market’s rebound is proving to be rather elusive, as the latest COVID-19 variant is expected to further delay a sustainable oil market demand growth moving forward. In its latest weekly report, shipbroker Allied Shipbroking said that “renewed concerns over COVID-19 are mounting around the globe, after the news of the new “omicron” variant, threaten once again global economic recovery. Worries are even more intense in the tanker market, where we have yet to see any significant freight rate rebound emerge. The mixed news of the last few weeks have been further fueling the uncertainty that is already dominating the oil market. The disappointing oil demand figures of 2020 hurt the market significantly, with data illustrating a drop of around 8.5% y-o-y. The restrictions imposed in movements globally, the subdued economic activity and the poor sentiment trimmed oil consumption. In contrast to this drop, total oil tanker fleet continued to grow in 2020 by almost 3% (compounding over the 2.6% rise noted in 2019), upsetting the balance in the market”.

According to Allied’s Research Analyst, Mr. Yiannis Vamvakas, “this year, we have seen an improvement in the demand – supply dynamics, as interest for crude oil shipments started to mount, while newbuilding deliveries started to stall. However, the freight rebound so far has not been impressive, maintaining rates at their lowest point in over a decade. The significant rise in oil prices during 2021 undoubtedly played a role in this diminished interest.

The current demand outlook is encouraging for 2022, with the latest IEA and OPEC data showing demand of around 100.6 – 100.9 mbpd, approximately 3.5% higher y-o-y. Nevertheless, these latest developments in the pandemic could well shift these latest estimates, given how any and all restrictions on movements effect demand for oil and petroleum products”.

“On the pricing front, the recent decision by OPEC+ to maintain its plan for additional production is likely to curb oil prices, a factor that could boost interest for oil shipments given how inventories in both Europe and the US have plummeted. Finally, fleet growth will also playing a significant role, with the most recent estimates now showing a rise of around 1.8% for 2022, helping close the demand and supply gap even further.

Tanker owners have seen a disheartening 2020, followed by a transitional year so far. Despite the slight improvement seen in recent months, we are still far short from a balance that could drive a strong freight market rebound. The current fundamentals may well be on a positive track, yet the current uncertainty and prospects of a fresh series of global lockdown measures could set things off track and back to square one. At the same time however all this could help retain fleet growth at moderate levels, eventually leading to a much better market balance taking shape down the line”, Vamvakas concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide