Tankers Expected to Benefit From Latest OPEC+ Decision
“Therefore, the January 4th production decision could be seen by some as a vote of confidence inthe strength of underlying oil demand. The IEA in its December 2021 report estimates 2021 oil demand increasing by 5.4 mbd and by a further 3.3 mbd in 2022. This should bring about a demand recovery to pre-pandemic levels by Q2 or Q3 2022 at 99.5 mbd. At the same time, rising production should be absorbed by rising demand. Non-OPEC+ supply is expected to increase by 1.8 mbd in 2022, driven by producers such as the US, Canada, and Brazil. Should OPEC+ cuts be fully unwound, and nonOPEC producers increase supply as expected, this would add a significant 6.4mbd to total oil supply. However, with some OPEC+ producers unable to meet current quotas, such a large increase in output may be a challenge”, the shipbroker noted.
According to Gibson, “the IEA estimates suggest a full unwinding of production cuts could cause supply to overtake demand by mid to late 2022. Assuming demand remains steady, this could lead to a build up of stocks and put pressure on oil prices, in turn leading OPEC+ to potentially re-examine the pace of unwinding cuts to ensure balance in the oil markets. Furthermore, if non-OPEC+ production was to increase further than forecast and Iranian crude re-enters the market, this would yet add to oversupply concerns, increasing the need to manage production increases further to maintain favourable oil prices and thus revenue for OPEC+ producers. The next few weeks could be key, with heightened oil supply risk in Libya and Kazakhstan potentially changing Mediterranean oil supply dynamics and further tightening oil markets”.
“Aside from these short-term threats, overall rising output should support crude tankers as greater volumes enter the market to meet rising demand, primarily in Asia, although recent mobility restrictions in response to Omicron in the region may weigh on demand optimism. Likewise, China has announced an initial 11% reduction in crude oil import quotas for 2022 to support refining industry consolidation and to meet environmental targets in the coming years. Both may weigh on tanker demand; however, oil consumption is still on track to recover and remain substantial in Asia and other economies, whilst European demand is unlikely to recover to pre Covid-19 levels. This means increasing volumes of additional production will have to be shipped East of Suez, assuming pandemic management policies do not hamper the demand recovery in the region. Overall, 2022 is likely to be a more positive year for both oil and tanker markets than 2021 but some headwinds may still exist and cannot be ruled out as both the oil and tanker markets continuenavigate a changing landscape”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide