The demand picture for oil tankers is steady – perhaps a bit too steady if you look at the freight rate movements for VLCC crude oil tankers and MR clean product tankers. This stands in contrast to the spikes that Suezmax owners have achieved during the first five months of 2012. Average daily earnings in the Suezmax segment has been double that of VLCC daily earnings at US$20 125/day as compared to VLCC earnings at US$9102/day.
A quick glance at the Time Charter Equivalent (TCE) Earnings for the clean tanker workhorse MR discloses some positive feedback from the start of the US driving season. Traditionally, the lead up to the start of that season is the strongest one in terms of imports and corresponding earnings. This trend has to some extent proven itself once again this year. The EIA figures disclose that US domestic production of motor gasoline has followed the same trend this year as the last, leaving room for optimism for gasoline imports to move up significantly should the arbitrage-trading of EU-to-US gasoline open up.
The import level of gasoline to the US from Europe is quite nicely mirrored in earnings, with a couple of weeks’ lag corresponding to the time from when the fixture takes place to the time of landing the cargo.
The product tanker fleet is seeing limited inflow of new tonnage nowadays as compared to recent years of high supply growth. The low level of new deliveries into the Handysize segments is actually being outpaced by tonnage being sold for demolition. During the past 14 months, 1.1 million DWT has left the fleet, sold for demolition. In the same period of time only 0.5 million DWT has entered the fleet, resulting in a very positive shrinkage of the fleet in that segment. This is in opposition to the changes to the MR fleet, where demolition has been 0.8 million DWT and inflow at 2.1 million DWT.
Contrary to the frantic delivery pace of dry bulk vessels, the tanker sector is seeing a much more balanced supply of new tonnage. Actually, the delivery pace has been spot on for BIMCO expectations, as the product tanker fleet is set to grow by 3.3% and crude tanker fleet to grow by 6.5% in 2012.
New crude tanker orders in recent months have been completely absent except for three VLCCs due for delivery in 2014 and 2015.
New contracts for product tankers have made a small jump forward, as no less than 17 new orders have been placed, adding to the 26 in the previous three months. Ten of the new orders were for MR tonnage. 72% of all new product tanker orders have been in the MR segment in 2012. This continues the trend from 2011 where 80% were MR-orders.
On the horizon for shorter term rate-improving exogenous events is the US driving season that runs from Memorial Day (28 May) until Labour Day (3 September) and the hurricane season which officially kicked off 1 June and runs all the way though to end-November.
As American gasoline consumption is peaking during the coming months, it is important to notice a few bullish factors that might impact product tanker freight rates positively. The current US gasoline stocks are at the bottom of 5-year-range at 200 million barrels; those figures are likely to spur higher internal production (which has already happened) and hopefully, also higher imports (which has not happened yet).
In the US Gulf in particular, we are about to scout for hurricanes to disrupt the US oil supply; NOAA Climate Prediction Center forecast one to three major hurricanes with top winds speeds of 111 mph or higher, ranking category 3 (Karl in 2010), 4 and 5 (Katrina in 2005).
Going into Summer in the Northern Hemisphere, BIMCO expects that freight rates in the crude oil segments will move a bit erratically, but more or less sideways. For VLCCs, that translates into US$10 000 - 20 000/day.
Short-term factors that may affect BIMCO's rate forecast on the upside or downside are primarily to be found at the macro level. As has been seen, a little less positive economic development in recent months dampened oil prices, and subsequently demand, as consumers remain hesitant to increase consumption on a large scale.
Handysize and MR clean rates should be supported by stronger gasoline demand from the US to support freight rates move around US$8000 - 13 000/day.
Written by Peter Sand, BIMCO
This is the third of a four-part summary of the BIMCO Shipping Market Overview & Outlook 2012-13. The full report can be accessed here.
Read the article online at: https://www.worldcement.com/europe-cis/02082012/bicmo_report_tanker_shipping_1183/