Breakwave’s Insights On The Tanker Market – May 21, 2024

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  • The VLCC (Very Large Crude Carrier) market has seen a slight upward trend as May comes to a close, with rates from the Middle East Gulf to China rising approximately 15% since the start of the month.
  • Despite this improvement, the market’s stability remains uncertain due to its volatile nature.
  • Fluctuations in vessel supply continue to influence market prices, with anticipation of upward pressure as June cargoes come into play.

Rising Chinese SPR (Strategic Petroleum Reserve) inventories and the upcoming OPEC+ meeting are expected to contribute to medium-term tanker demand, which may not yet be fully reflected in the futures market.

Commodity Price Volatility and Oil Prices

While commodity price volatility has increased across various sectors, oil price volatility remains subdued. Elevated inventories and projections of record-high global oil supply mitigate concerns of a crude oil shortage. Oil demand growth forecasts vary between 1.1 mbpd and 2.25 mbpd for 2024, reflecting uncertainty in the market. Despite signs of economic recovery in China, geopolitical stability and balanced market conditions keep oil prices relatively stable.

Long-term View

The tanker market is rebounding from a period of subdued rates due to reduced new vessel supply and recovering oil demand. A low orderbook and favorable demand fundamentals are expected to support increased spot rate volatility in the medium to long term. Ongoing geopolitical tensions further contribute to freight rate support.

In conclusion, while short-term market stability remains uncertain, medium to long-term prospects for the tanker market appear favorable, supported by improving demand fundamentals and geopolitical factors.

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Source: Breakwave Advisors