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Tankers: Peak Demand is Coming, But Cargoes Will Still Be Plenty

A shift in overall demand patterns is expected to arrive to the tanker market, after the peak demand reference point arrives. Of course, some segments are expected to benefit more than others. In its latest weekly report, shipbroker Gibson said that “oil demand will peak this decade, that is the call by the International Energy Agency (IEA) who released their Oil 2024 report this week. The agency is now forecasting global oil demand growth to slow for the remainder of this decade, peaking in 2029 at 105.6 mbd from 103.2 mbd in 2024 and slip marginally to 105.4 mbd in 2030. The bulk of this demand growth, as expected will come from India and China, and other emerging Asian nations, primarily the petrochemical sector and aviation demand. The growing electrification of road transport will continue to pressure road fuel demand, with gasoline demand expected to fall by 1.6 mbd by 2030”.

According to Gibson, “most of this gasoline demand loss will come from developed OECD nations as the energy transition gathers pace. The only bright spots for oil demand in the advanced economies is likely to be small increases in jet fuel demand and petrochemical feedstocks in the US. Europe is expected to see gasoil/diesel demand fall from 6.4 mbd in 2024 to 5.7 mbd in 2030 as both industrial and transport demand give way to electrification”.

Source: Gibson Shipbrokers

Meanwhile, “on the supply side, non-OPEC+ production is expected to increase significantly, exceeding global demand with a supply glut of at least 8 mbd. Between now and 2030, supply is forecast to rise by 6 mbd from 102.9 mbd to 113.8 mbd. Although 45% of this will come from NGLs and gas condensates requiring the use of gas carriers and not tankers. Non-OPEC production is set to increase by 4.6 mbd, with 2.1 mbd coming from the US and a further 2.7 mbd coming from a combination of Brazil, Guyana, Canada and Argentina. Core OPEC supply is expected to increase from 33.1 mbd in 2024 to 34.1 mbd in 2030, driven by expansions in the Middle East, specifically the UAE, Iraq, Kuwait and Saudi Arabia. Meanwhile African members will continue to see production difficulties driving their output even lower from existing levels”.

“For the refining sector, slowing global demand growth and the energy transition will increase the pressure. Atlantic basin refinery throughput is expected to peak in 2025 and East of Suez in 2028. Overall global refinery runs will increase 2.1 mbd by 2030 driven by a 2.7 mbd increase East of Suez, while West of Suez will see a 600kbd contraction. Refiners will increasingly be forced to modify their crude slates to reflect lower road fuel demand and pivot towards petrochemical feedstock as well as invest in biofuel production”, Gibson said.

So, what does all this mean for the tanker markets? According to the shipbroker, “firstly, for the crude tanker sector, although peak demand is in sight, the overall volume of cargo which will need to be shipped is still large. This combined with an ageing fleet, stricter environmental regulations and a large pool of vessels engaged in sanctioned trades mean that the global crude market is likely to remain healthy past 2030. Rising Atlantic crude supply combined a growing structural crude supply deficit in Asia will see higher West/East crude flows. This should result in a continued expansion in crude tonne miles into the next decade. For the product tanker market, the outlook may be more challenging as road fuel demand eases by the end of the decade and more demand is centered in the East, closer the anticipated domestically orientated refining capacity This could counter some of the tonne mile demand growth we have seen in recent years”.

“Likewise, the shift in demand from conventional refined products to biofuels, petrochemical feedstocks and NGLs will result in new opportunities for specialized and chemical tankers as well as the gas carrier fleets. For both crude and product tankers, this period will undoubtedly result in some readjustment, but fleet supply fundamentals should be able to offset these changing patterns or in the case of the crude sector, likely provide a stable source of support beyond 2030. However, it is important to note that this is just one view while others such as OPEC and other forecasting agencies are taking a more bullish view about when oil demand will peak”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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