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Tankers: Oil Market Direction to Impact the Market Moving Forward

Tanker market participants will be closely watching OPEC’s upcoming meeting, in order to draw any conclusions for the future of the oil market’s dynamics. In its latest weekly report, shipbroker Gibson said that “oil markets once again are carefully watching for any comments from OPEC+ officials, with speculation building what the group will decide during their upcoming meeting on June 2nd. Will OPEC+ continue with their current production cuts or will they cut further, allowing non-OPEC members to grab an even larger market share? Alternatively, what are the chances of any easing in voluntary production cuts, particularly for countries that are in need of increasing their revenue stream? The importance of OPEC+ for the crude tanker market should not be understated, with all member states accounting for 41.3 bpd or 41% of global supply in April 2024”.

Source: Gibson Shipbrokers

“According to OPEC’s monthly forecast, global oil demand is projected to grow by 2.2 mbd this year. The analysts attribute the increase to robust demand growth in non-OECD countries, where consumption is projected to rise by 1.98 mbd. The lion’s share of demand gain is coming from China, with an annual increase at 0.71 mbd. Strong growth is also seen in India, other non-OECD Asia, Middle East and Latin America. Assuming OPEC’s demand projections materialize, member states need to boost their production in order to meet the expected level of demand”, the shipbroker said.

Gibson added that “however, not many oil analysts are as bullish about growth prospects for oil demand. For example, the IEA’s demand prediction for this year is much lower, at 1.1 mbd, amounting to half of the OPEC’s level. The agency believes that post-Covid surge in demand led to over 2 mbd growth in consumption both in 2022 and 2023, but demand will grow at a slower pace this year as post-Covid boost has run its course. Total OECD demand is expected to dip by 140 kbd, almost entirely due to declining oil demand in Europe. According to the IEA, the industrial downturn and a mild winter has undermined gasoil demand in all three OECD regions during Q1 2024, with deliveries down by 330 kbd YoY. Non-OECD demand is expected to increase by 1.2 mbd, with China accounting for over 40% of total non-OECD growth”.

According to the shipbroker, “on the supply side, non-OPEC+ supply is expected to rise by 1.4 mbd in 2024, according to the IEA. Although this is comfortably above the agency’s demand predictions, OPEC+ production will fall by 0.84 mbd, assuming voluntary cuts are maintained through the year. The analysis suggests a deficit, as total global oil supply will grow only by 0.58 mbd, just over half of the projected demand level. With this in mind, there could be upward pressure on oil prices, offering an incentive for OPEC+ to ease production cuts”.

“However, the reality appears different. Brent prices are trading around $81-83/bbl, after averaging $89/bbl in April as concerns over geopolitical tensions in the Middle East ease. The downward trend in oil prices suggests a current oversupply, and the faltering demand growth supports this notion further. As such, the prevailing market fundamentals may deter OPEC+ from loosening their existing production cuts too soon”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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