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Tankers: A Year of Two Halves Underway?

The tanker market could be set for a year of two halves, with the first half a continuation of last year and the second half expected to be much improved. In its latest weekly report, shipbroker Gibson said that “2020 was a rollercoaster year, one with extreme ups and downs. Record highs and record lows. For the tanker market, in many ways it was year of two halves, with high earnings in the first half, and low returns in the second. Although the same degree of volatility is not expected this year, it is shaping up to be a year of two halves”.

Source: Gibson Shipbrokers

According to Gibson, “the short-term signals are undoubtedly bearish. Restrictive lockdown measures remain a necessary containment measure for much of the world which will continue to limit the recovery in fuel demand for at least the first quarter. Aviation and transportation fuel demand will struggle to recover over the coming months. OPEC+ will need to carefully manage production to balance supply and demand. Floating storage is expected to continue to ease, however the pace of the stock draw will depend on the supply/demand balance. Saudi Arabia’s decision to voluntarily cut production by 1 million b/d could accelerate inventory destocking, releasing even more tonnage into the market”.

The shipbroker added that “by the second quarter, as the northern hemisphere moves into spring, the green shoots of recovery should start to be seen. Vaccinations will have been given to an everincreasing portion of the population in Europe, the United States and beyond, whereas countries in the Middle East and Asia are starting to rollout Chinese made vaccines. India has now also approved two vaccines. It will take time, but as more and more of the population, particularly those most vulnerable receive a vaccine, governments around the world will have more flexibility to avoid oppressive lockdown measures. By midsummer it is hoped, but not guaranteed that the world will be closer to normality than any point in the prior 15 months”.

Gibson added that “with hope that vaccines will bring the virus under control by mid-2021, the second half of 2021 is expected to see a strong rebound in oil demand. Pent up business and leisure travel should support transport fuel demand, whilst the impact of fiscal stimulus could support economic activity. Freight rates will be expected to find support, and the markets will see a better end to 2021 than they saw in 2020. Still, by the end of 2021, vaccinations are at the very best likely to reach 1/3rd of the global population based on the production capacity of the leading vaccines”.

“Cautious optimism should be the key phrase going forwards with vaccines, fiscal stimulus, and a gradual return to the new normal. However, several key dependencies will determine the scale of the recovery in tanker freight rates. On the fleet supply side, availability is likely to increase in the short term as vessels are released from storage, which could return to normal operational levels in early spring. Scrapping will need to increase to balance newbuilding deliveries and support tanker earnings at a time when demand is yet to return to pre-pandemic levels. Fuel consumption needs to continue to see a strong recovery all the way to the end of 2021 and for this, vaccines need to be effective and widespread by the winter of 2021 so lockdowns can be avoided again. Still, if 2020 taught us anything, it is to expect the unexpected. With a new president in the White House, elections in Iran, the fallout of covid-19 and major regulatory change on the horizon, predicting the next 12 months is anything but straight forward”, Gibson concluded.
Nikos Rousanoglou, Hellenic Shipping News Worldwide

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