Tankers: A Structural Shift is Underway

The tanker market will be a mainstay in moving crude oil and products for many decades to come. However, a peak in oil demand is expected to have an impact in the way that the market currently operates. In its latest weekly report, shipbroker Gibson said that “the IEA has just updated its long-term view of oil markets. As usual, the agency presented different scenarios and cautioned that its outlook does not provide a forecast of what will happen; instead, it offers several scenarios that explore different possible futures, depending on certain assumptions at government, industry, and consumer level. The Stated Policies Scenario is perhaps the most realistic, based on the latest market data, technology costs and incorporates the prevailing policy settings in countries around the world”.

“In this scenario, the IEA expects global oil demand to peak before 2030 at just under 102 mbd (excluding biofuels), up by circa 3 mbd from 2023 levels. Over the period, strong gains are seen in oil demand from the petrochemical, aviation and shipping sectors, whilst road transport demand is 0.6 mbd higher in 2030 relative to 2023 levels. Yet, global consumption still peaks, and that is primarily due to lower demand from buildings and power, where consumption declines by 2.4 mbd, with Middle East oil demand in the power sector declining by about 900 kb/d to 2030. Beyond 2030, global oil demand declines, but the rate of decline is quite slow, with consumption down to 93.1 mbd by 2050 (less than 9% relative to 2030). Nonetheless, a significant decline is seen over the period in road transport demand due to accelerating uptake of electric vehicles, whilst oil demand in building and power also continues to decline. Yet, this is in part offset by continued increases in demand from the petrochemical, aviation and shipping segments”, Gibson said.

According to the shipbroker, “the IEA also expects stark differences in regional oil demand patterns. Demand in North America and Europe is expected to decline notably over the forecast period, down by 14.4 mbd in 2050 vs 2023, while continued growth in consumption in South America, Africa, the Middle East and Eurasia is projected to partially offset the decline in advanced economies. In Asia, demand largely remains flat, down by 0.4 mbd by the end of the outlook period, with the anticipated decline in Chinese demand more or less balanced by continued growth in other developing Asian economies. Oil production is also expected to fall in all regions except Latin America and the Middle East by a sizable 14 mbd by 2050. The decline in crude production considerably outstrips the potential loss in demand, suggesting a rising reliance on the Middle Eastern crude, with regional crude trade to Asia continuing to augment amid declining crude production in SE Asia, India and China”.

Meanwhile, “major changes in the global refining industry are also seen. Pressured by falling demand for road transport, European refining runs are projected to decline by circa 4.3 mbd between 2023 and 2050. A smaller decline is projected in North American refining runs, down by just 2.6 mbd over the period, considerably lower than the anticipated decline in demand. With Latin American oil demand still expected to grow over the forecast period, this suggests that US Gulf refiners may find more opportunities exporting products into LATAM. Growing demand in Africa could also offer product export opportunities, as anticipated increases in demand are greater than new refining capacity coming online. In Asia, refining runs are at similar levels in 2050 relative to 2023; yet they increase by around 1 mbd by 2035 before declining by a similar number by 2050”.

“All in all, the latest IEA long term report reaffirms that the global oil markets are likely to be transformed over the next two decades. However, despite an anticipated decline in world oil demand, major differences in regional supply and demand patterns suggest tanker trade will still have a critical role to play for decades to come”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide