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Tankers a Silver Lining for Ship Owners

The tanker market has offered reason for respite for tanker owners amid the pandemic. In its latest weekly report, shipbroker Allied Shipbroking said that “with the first quarter of 2020 now firmly written in the books, it is worth examining what we have witnessed so far in the tanker market. Undoubtedly it was a very interesting quarter with a significant freight boom taking place earlier in the year, tensions among oil producers creating volatile market conditions and the COVID-19 pandemic reshaping the global economic environment. The truth is that the recent developments as part of the pandemic have affected the whole global economy, diminishing demand for several oil products which in turn has started to show a slight trend in crude oil itself”.

Source: Allied Shipping Research

According to Mr. Yiannis Vamvakas, Research Analyst with Allied, “looking just at the BDTI index, we can see on absolute terms that the quarterly loss was 12.7%. This is a disappointing figure, but not devastating especially when it is compared to the dry bulk market, proving that the oil market was able to resist the effects of the global economic downhill that is being witnessed. Adding to this, we noted that both the VLCC and Suezmax TCA have gained 164.4% and 37.7% respectively on a quarterly basis. It seems as though that had it not been for the catastrophic February, things may have been even better for the crude oil tanker segments”.

Vamvakas said that ‘the price war between oil producers has pushed Brent and WTI to record lows, helping demand remain healthy even under the current circumstances, while several tankers have been “taken out” of the global fleet in order to be used as storage. In contrary to all of this, we should note that the Aframax TCA moved in the opposite direction this past quarter, losing about 30.8%. Given that oil price is not expected to move significantly upwards in the coming months (obviously not considering any major shift in production plans of the main oil producers), we are anticipating interest from the charterers’ side to remain intense during the start of the 2nd quarter. Adding to this the glimpse of optimism reflected in the rebound noted in European stock markets on the back of the stabilization seen in the COVID-19 spread, and you could have the basis for a gradual improvement to take place. On the supply side, we have seen the global tanker fleet increase by 53 units during 1Q20, with 23 of them being crude oil carriers”.

Source: Allied Shipping Research

Allied’s analyst also noted that “this quarterly rise is around 1%, an encouraging figure when compared to the respective fleet expansion of 2.63% noted in 1Q19. On the supply side things remain positive for now, with interest for newbuilding orders having eased back as of late. However, it is likely that this trend will shift in the near future, as ship recycling activity will now be minimal due to the COVID-19 lockdown measures taken in the Indian Sub-Continent, while at the same time this pause noted in newbuilding activity is expected to be temporary. On the positive side though the orderbook to vintage fleet ratio (a figure that depicts the potential additions compared to potential demolition candidates) holds at fairly good levels”.

Vamvakas concluded that “the ratio now holds for the VLCC segment at a mere 13.33%, for the Suezmax 24.00% and for the Aframax 7.89%, the lowest points noted the last 5 years. Taking into consideration the resilience that crude oil tanker market has shown so far, we anticipate the market to remain on a positive track in the coming quarter, even if there are some signs of volatility emerging. The low-price of oil, the potential that the worst is now behind us and the healthy status of the supply side, all leave space for optimism. However, as we are deliberating on a market that is largely exposed to geopolitical events and highly linked to the global economy, it is essential to remember that there could always be another “blank swan” hiding around next turn”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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