In its analysis of the product tanker market, the shipowner said that during the second quarter of the year, “product tanker spot rates remained on average close to historically low levels during the second quarter of 2017. On the supply side, increased tonnage availability continued to apply downward pressure on rates, with year on year product tanker fleet growth estimated at 5.2% as of the end of the second quarter. The pressure on rates was further exacerbated by limited arbitrage opportunities, as OECD oil product inventories remained close to historically high levels. In the West, the market was supported by solid exports from the U.S., which reached seasonally new record levels, on the back of increased U.S. refinery throughput and increased demand from Latin America. Nevertheless, this was insufficient to reduce the supply-demand imbalance in the market. In the East, refinery maintenance in the first part of the quarter and decreased Chinese products exports had a negative impact on chartering activity. The market modestly recovered in June on the back of a rebound in Chinese exports and as refineries returned from maintenance, but rates remained overall at subdued levels on most trading routes. In the period market, rates for Medium Range (“MR”) product tankers have seen a modest improvement compared to the previous quarter with the bulk of fixtures currently being short-term, as owners remain reluctant to fix longer period”, Capital Product Partners said.
“Meanwhile, on the supply side, despite somewhat increased activity in terms of new orders for product tankers, the MR product tanker orderbook currently stands at 7.1%, the lowest level on record. In addition, product tanker deliveries continued to experience significant slippage during the first half of 2017, as approximately 32% of the expected MR and handy size tanker newbuildings were not delivered on schedule. Analysts estimate that net fleet growth for MR product tankers will amount to 3.0% in 2017, below the 2016 growth rate of 4.9%. On the demand side, analysts expect overall product tanker demand growth of 2.4% in 2017, largely supported by growth in imports into Latin America and Asia and continued growth in U.S. exports.”
In the Suezmax market, Capital Product Partners noted that “Suezmax spot earnings softened in the second quarter of 2017 compared to the preceding quarter. The existing agreement between a joint committee of OPEC and Non-OPEC oil producers to cut oil production continued to limit demand for Suezmaxes, while activity further waned in June as we entered the traditionally weak summer season. In addition, increased Suezmax newbuilding deliveries combined with weak rates across other crude tanker segments added pressure on the market. On the positive side, Chinese crude imports remained at firm levels. The soft spot market had a negative impact on period activity as well as period charter rates, which declined when compared to the previous quarter”.
Similarly, the shipowner said that “on the supply side, the Suezmax orderbook represented, at the end of the second quarter of 2017, approximately 13.1% of the current fleet. Contracting activity continues to be limited, as 14 Suezmax tankers have been ordered since the start of the year. Analysts estimate that slippage for the first half of 2017 amounted to 31% of the expected deliveries. In terms of demand, Suezmax tonne/miles are expected to be supported by rising long-haul exports from the U.S. and growing crude import demand in India. Overall demand for the sector is projected to expand by 5.3% in 2017”, the ship owner concluded.
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Source: Capital Product Partners LP
