The tanker market’s medium-term momentum remains positive after the latest round of reports. In its latest weekly report, shipbroker Gibson said that “last week the IEA published its much-anticipated Oil 2023 report, after being forced to cancel/postpone two of the previous three releases due to the pandemic and watTORr in Ukraine.
Oil Demand Growth Slows
Under the IEA’s scenario, oil demand growth slows from 2.4mbd in 2023, to average 800 kbd in 2024 as the final remnants of pandemic induced demand destruction pass. By 2028, the agency predicts annual oil demand growth will slow to just 400 kbd as decarbonisation policies limit the increase in hydrocarbon consumption. Petrochemical feedstocks (LPG, ethane and naphtha) are the main driving force of oil demand over the forecast period, whilst gasoline demand contracts on the assumption that the electric vehicle (EV) fleet grows to 155 million vehicles by 2028.
According to the shipbroker, unsurprisingly, Asia-Pacific dominates regional demand growth, even if Chinese demand is largely flat by 2028. In total, Asian demand rises to 41.3mbd by 2028, up 5.5mbd on 2022 levels, although much of that growth first occurs in 2023 and 2024. Despite the demand slowdown, there are positive factors for tankers. Oil supply growth continues to grow, with exploration and production (E&P) budgets rising again this year.
Gibson added that “however, as with all forecasts there are sensitivities. There is no provision for a much-feared recession, with the IEA’s GDP growth projections largely based on IMF data, which average at 3.3% over 2024- 2028. It also assumes that sanctions against Russia, Iran and Venezuela persist. Likewise unforeseen black swan events cannot be accounted for. For tankers, the report paints a broadly positive picture in the medium term”. Whilst the impact of decarbonisation on oil demand growth rates cannot be ignored – there is still demand growth. Furthermore, that growth will be amplified by the impact of West to East crude trade flows.
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