Commodities News

Tanker Market Predicted To Be Weak Short Term

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Tanker owners preparing for negative Q2 as predictions bode ill. In its market perspective that is latest, ship owner Teekay Tankers said that “crude tanker spot rates remained firm throughout the second quarter of 2020, particularly through the early area of the quarter.

Crude trade volumes increased during April 2020 as a result regarding the price that is short-lived between Saudi Arabia and Russia, leading to increased tanker demand. Floating storage also gave support to crude tanker spot rates during the quarter, peaking in early May 2020 when almost 500 tankers, or higher 60 million deadweight tonnes (mdwt), was in fact storing about 400 million barrels of oil.

This storage space that is floating driven by a significant mismatch between elevated levels of global oil production and depressed oil demand due to the impact of COVID-19, resulting in a huge surplus of both crude oil and refined services and products. Onshore storage filled rapidly which often forced oil into floating storage, particularly once the crude oil futures curve moved in to a contango” that is steep.

Teekay noted that “crude tanker spot rates have softened since the middle of might 2020 as a result of lower oil that is international while the return of some vessels from floating storage.

The OPEC+ group implemented oil that is record cuts of 9.7 million barrels a time (mb/d) from the beginning of May 2020, with Saudi Arabia, UAE and Kuwait pledging a further 1.2 mb/d of cuts during June 2020. Compliance with your cuts was relatively high and has led to a reduction that is significant trade that is crude from May 2020 onwards. Oil manufacturing in addition has declined in non-OPEC countries because of the impact of weak oil prices, with total oil that is international falling by 11.3 mb/d between April and May 2020 and also by a further 2.4 mb/d during June 2020.

Relative to the Global Energy Agency, global oil production of 86.9 mb/d during June 2020 was the lowest in approximately nine years, which includes weighed on tanker demand from May 2020 onwards. In addition, floating storage space has be removed from the record highs noticed in May 2020 to around 250 ships, or 38 mdwt, keeping 240 million barrels of oil as of end-July 2020. Taken together, a reduction in trade volumes, coupled with vessels returning from floating storage space, has placed pressure on crude tanker spot rates during the part that is latter of second quarter of 2020, and this weakness has proceeded to the early an element of the third quarter of 2020”.

In line with the ship owner, “looking ahead to the half that is second with the year, international oil production is expected to increase as both OPEC and non-OPEC countries are anticipated to improve oil supply to industry. The OPEC+ group is set to go back 2 mb/d of manufacturing from August 2020 onwards, though this could not all ultimately result in additional export volumes, as Saudi Arabia has pledged to keep its production that is extra for use throughout the summertime when energy that is local is greater. Non-OPEC oil production could also start to rebound, with international oil rates having stabilized above $40 per barrel in recent months. In addition, global refinery throughput is anticipated to increase by approximately 9 mb/d between the second quarter and 4th quarter of 2020, which will produce extra oil need that is crude. Although a share of this supply that is additional be sourced from oil being pulled away of stock – both onshore and offshore – we should nevertheless anticipate an increase in crude tanker demand throughout the second half of the 12 months. However, this might be offset by ships returning to the trading fleet from drifting storage space and, consequently, the balance that is relative recovering tanker demand and increasing fleet supply will determine crude tanker spot rates. Overall, we anticipate a relatively weaker tanker that is crude throughout the 2nd 50 % of 2020, especially contrasted to the strong first 1 / 2 of 2020”.

Teekay added that “the long-term outlook continues to be extremely tough to forecast due to significant uncertainties over the strength and pace of a potential oil demand data recovery, with much based on how various nations and regions find a way to contain the spread of COVID-19 over the coming months. However, we remain determined by supportive fleet supply basics, utilizing the tanker orderbook currently at a 24-year low whenever measured as a portion for the fleet that is current.

Our company is yet to see any meaningful tanker scrapping this present year, but a period of paid off prices could lead to higher levels of removals over the coming months, which would help limit supply growth that is fleet. Finally, brand new tanker ordering remains acutely low, and will probably stay so in the foreseeable future that is near. Overall, we expect low quantities of tanker fleet development for at least the couple that is next of.

To sum up, the tanker market looks set for a more length that is challenging the coming months following a very good first half of the year that is entire. The ship owner concluded although the need outlook is extremely uncertain, we remain encouraged by the tanker fleet supply fundamentals which appear much more favourable compared to prior market rounds. Tanker owners preparing for negative Q2 as predictions bode ill.

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Justin N. Richards

Justin N. Richards is a Florida-based technical analyst, market researcher, educator, and trader. Justin began his career in Chicago in 2001 performing futures market analysis for floor traders at the Chicago Board of Trade and the Chicago Mercantile Exchange. He also worked for numerous brokerage firms during that time, all of which hold him in high regard, and he has been providing outstanding analysis services for traders worldwide ever since. Mr. Richards is an expert in the area of market patterns, price and time analysis as it applies to futures, Forex, and stocks. In addition to these talents, he provides educational services for investors looking to improve their analysis and trade skills. Justin has a B.A. in Business Administration from UCLA and an M.S. in Financial Markets and Trading from the Illinois Institute of Technology. Justin’s professional experience, education, and discipline, not only make him an exceptional analyst, they point him out as a reliable, hard working and intelligent business strategist who is dedicated to his craft.
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