The year 2023 has been marked by significant turbulence in the oil and tanker markets, driven by geopolitical events, climate-related challenges, and shifts in demand and supply dynamics. While not as volatile as the preceding year, the oil and tanker industries have faced disruptions and uncertainties that have impacted trade flows, freight rates, and geopolitical relations.
Oil Demand and Geopolitical Events
China’s decision to abandon its zero-COVID policy provided a substantial boost to oil demand, particularly benefiting Very Large Crude Carriers (VLCCs). However, the implementation of a crude price cap and embargoes on Russian refined products influenced tanker markets, leading to trading inefficiencies and market shifts. The Middle East witnessed increased geopolitical tensions, affecting shipping routes and posing risks to vessels, especially those associated with Israel.
OPEC+ Decisions and Supply Dynamics
OPEC+ faced challenges in November with output cuts extended and deepened for Q1-2024. Despite these cuts, oil prices fell, and a small contango emerged, reflecting prompt oversupply. Non-OPEC supply, including significant contributions from the US, Brazil, and Guyana, continued to surge. Oil prices averaged $82.28/bbl for the year, showcasing the adequacy of supply to meet demand growth.
Tanker Market and Fleet Development
Tanker owners experienced exceptional earnings in 2023, driven by robust demand and supply fundamentals. Newbuilding orders reached an 8-year high, with 291 firm orders for vessels exceeding 25,000 deadweight tons. However, scrapping was limited, reflecting the profitability across asset classes. Despite uncertainties in the economic outlook and geopolitical risks, 2024 is anticipated to be another strong year for the tanker industry.
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Source: Gibsons
