Tankers Could Face Rocky Period Ahead
“According to the IEA, global oil demand is estimated to have fallen by 29 million b/d in April, and 26 million b/d for May, reducing demand to levels not seen in 25 years. A huge stock build is inevitable over the coming quarter and despite more storage capacity being made available via SPRs, floating storage will be inevitable. This floating storage demand is likely to be the main pillar of support for the tanker market once OPEC+ cuts are felt by the market. At the time of writing, calculations show that the contango in ICE Brent supports 3 months storage at $138,000/day and 6 months at $89,000/day, before any profit margin for the trader is accounted for. VLCC spot rates currently stand at $165,000/day”, Gibson said.
The shipbroker added that “the big question is for how long storage demand can support the tanker market? Latest projections from the IEA pointto a significant stock build in Q2 2020, tuning into a stock draw as soon as Q3. However, a high degree of uncertainty exists in this forecast. Firstly, it assumes that demand begins to recover after steep reductions in April and May, and secondly, it assumes that OPEC+ stays the course on its deal. However, if this scenario is assumed to be the case, then the tanker markets face a rocky second half to 2020 as floating storage will start to decline and seaborne trade volumes will remain severely depressed. At this point in time, it seems hard to envisage such a quick recovery in demand, but irrespective of timing, demand will eventually recover, and oil stocks will be drawn down”, Gibson noted.
According to Gibson, “beyond 2020, the tanker markets look to face a rocky period. World oil demand is not expected to recovery back to 2019 levels until well into 2021. Yes, the OPEC+ deal could be revised, or even collapse, but ultimately oil supply and demand will have to move towards a balance, be it from OPEC+ members or from other countries such as the US and Canada. It seems that right now,tanker owners should continue to make hay whilst the sun shines, wary of storm clouds gathering just over the horizon”, the shipbroker concluded
Nikos Roussanoglou, Hellenic Shipping News Worldwide