Our belief in a structurally driven strengthening of the tanker market from the second half of 2021 remains intact. In addition, we now also see how short-term disruptions have rapid effects in the market. This clearly indicates that we, after all, have a market in relatively good balance, reports Concordia Maritime.
Fluctuations in the market
In recent times, we have once again been able to see how fast it can fluctuate in the tanker market – due to changes in the supply or transport flows of oil. We saw it partly during the Ever Green situation in the Suez Canal, and partly in connection with the cyber attack on the Colonial Pipeline, which cut off the flow of oil pipelines between the Gulf of Mexico and the US East Coast. Almost half of the consumption of refined oil products on the east coast is met by these pipelines, and in just a few days the market in the Atlantic for product tankers had risen by almost 100 percent – only to fall back again. This at the same time as the American “car season” is just around the corner. Fears of a shortage of petrol led to long queues and a shortage of petrol at around 12,00 petrol stations in the southern United States.
Towards a market in better balance
With regard to the market’s more long-term development, we, and many of our industry colleagues, continue to believe that the market will return. Among the main driving forces are rising oil consumption:
- The world today consumes about 96 million barrels per day – but produces only about 94 million barrels per day.
- This is what has made the stocks now finally down to the so-called 5-year average.
- In order not to reduce inventories further, production is already needed to increase by about 2 million barrels per day – and this will come from Opec + over the next 3 months.
- In addition, oil demand is also expected to gradually continue to rise from 96 MBD to 100 MBD now during the second half of 2021.
Vaccination and stimulus package
That we now see a gradual return to a more “normal” consumption of oil is due to developments in the outside world. Mass vaccination against covid-19 is advancing strongly in many parts of the world and together with the stimulus packages that have already been implemented or are about to be made available, this is driving increased mobility, consumption and industrial production.
In the United States, the number of air travelers at the end of March 2021 was twice as many as a year earlier. It is of course impossible to predict at what pace that development will continue, but the fact is that now the vaccine is here and with it, many will again want to travel and meet.
Of course there are clouds of unrest – it always does. In addition to causing great human suffering, the development of the corona pandemic in India also weighs on the recovery in demand for oil in the country. In addition, rising tensions in the Middle East are currently creating uncertainty. In the tanker market, the lifting of sanctions against Iranian tankers could increase the availability of transport capacity, which could to some extent affect market rates.
Even stronger in 2022
Forecasts for 2022 indicate further market improvements, driven by a continued increase in demand for oil and thereby also for tank transports. Demand for crude oil and product tankers is expected to increase by 4–5 percent in 2022 to return to just above the 2019 level. At the same time, growth in the tanker fleet is expected to be low. In recent weeks, we have been able to see an increased order of, above all, container vessels – but very few new tankers are still ordered. The increased demand for shipyard capacity has now led to an increase in delivery times. If it normally takes 1.5 years to get a ship delivered (after ordering), it now takes 2-2.5 years. All in all, this is likely to help prolong the strong market we, and many others, are now facing.
Just like with the pandemic, it is important to hold on and persevere. Better times await around the corner.
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Source: Concordia Maritime