Tanker Trade in Flux: The Red Sea Crisis Impact is Growing

Supplies, cargoes and ships have turned on their heads over the past few weeks, as a result of the crisis in the Red Sea. In its latest weekly report, shipbroker Xclusiv said that “in its widely monitored monthly oil market report, the Organization of the Petroleum Exporting Countries (OPEC) projects global oil demand to increase by 2.25 million barrels per day (b/d) in 2024, followed by an additional 1.8 million b/d in 2025, driven by a strengthening Chinese economy. In contrast, the growth of non-OPEC liquids production is expected to be more moderate, reaching 1.34 million b/d in 2024 and 1.27 million b/d in 2025, led by the United States, Canada, Guyana, and Brazil. OPEC anticipates demand for its crude to reach 28.49 million b/d in 2024 and 28.96 million b/d in 2025, exceeding the December 2023 output of 26.7 million b/d”.

“On the other hand, the U.S. Energy Information Administration (EIA) forecasts global liquid fuels consumption growth to be 1.4 million barrels per day (bpd) in 2024 and 1.2 million bpd in 2025, a slowdown from the 1.9 million bpd growth observed in 2023. This moderation is attributed to a weakening Chinese economy, enhanced vehicle fleet efficiency, and the end of pandemic-related growth in 2023. The EIA also predicts that U.S. crude production will reach record levels in the next two years, but at a slower pace. Additionally, it expects global production to surpass consumption by mid-2025, leading to an increase in petroleum inventories”. The shipbroker said.

According to Xclusiv, “the escalating pressure on shipowners to avoid the Red Sea significantly impacted European refined product imports during the first half of January. Surging freight rates and diverted tanker routes constrained supplies. Europe’s imports of oil products from outside the region averaged 2.3 million b/d from January 1 to 17, down from the 2.9 million b/d recorded in December. Arrivals from Saudi Arabia, India, and Kuwait plunged by 15%, 31%, and 43%, respectively, from December levels during the same period. These diminishing import volumes pose a considerable threat to diesel supplies. Europe relies on the Middle East for approximately one-third of its diesel supply, and with Insights Global data indicating stock levels 257,000 barrels below the five-year average on January 11, the risk of shortages is substantial”.

Meanwhile, “although the dry bulk market has corrected significantly, with the BDI closing at 1,308 points on Wednesday, the lowest level of the past 4-months, during the last two days of the week we witnessed signs of resistance. BDI closed the week at 1,503 points gaining around 13% in 2 days, while the BCI increased almost 23% during the last days and closed the week at 2,244 points. BPI closed the week at 1,550 points, an increase of around 10% on a weekly basis, while the BSI has reduced almost 5% w-o-w to 1,030 points. Rio Tinto’s Group announcement offers a glimmer of optimism for the dry bulk sector. The leading exporter of iron ore globally anticipates that the expanded stimulus measures in China will propel the overall economy towards a gradual recovery this year. During the early stages of the fourth quarter, China’s economy displayed indications of stabilization, with augmented investments in infrastructure and manufacturing counterbalancing the prolonged challenges in the troubled property sector”, Xclusiv concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide