The tanker freight market in 2024 is expected to surge despite challenges such as OPEC+ supply cuts, geopolitical conflicts, and a potential slowdown in oil demand growth. Factors like tightening fleet capacity, increased US crude exports and shifts in trade patterns contribute to the positive outlook.
Impact of Geopolitical Factors
Violent attacks in the Red Sea are anticipated to keep insurance costs high, prompting tankers to opt for longer routes via the Cape of Good Hope. This choice increases ton-miles, and voyage durations, and tightens supply, leading to higher freight rates. The Suez Canal route also faces increased costs due to higher fees and a carbon tax for Europe-bound cargoes.
Changing Trade Patterns and Fleet Dynamics
Trade patterns have evolved, with increased crude movement from the US to Europe, a decline in volumes from the Persian Gulf to the US, and a rise in flows from Russia to East Asia. The consolidation of oil flows favours higher ton-miles and freight. Despite an expected increase in OPEC+ crude supply and US exports, fleet growth is slowing, with modest growth forecasts and potential capacity constraints in 2024. This tightening fleet capacity is poised to be a key determinant of tanker freight.
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Source: S&P Global
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