- Oil tanker owners scrapped a record number of ships in 2018
- World’s largest and second-largest exporters lifted their combined output by about 1.5 million barrels a day
- OPEC and allied producers to reset a pact to limit global crude production starting in January 2019
Oil tanker owners scrapped a record number of ships this year and those who missed out were unable to cash on a sharp rally in rates.
According to data from Clarkson Research Services Ltd., part of the world’s biggest shipbroker, owners purged a record 100 of the industry’s main crude carriers so far, with most of that happening in the first half of the year. That’s no surprise, as up to September the vessels — which transport roughly 40 percent of the world’s crude were on course for the worst average earnings in at least three decades.
Owners demolished a record number of oil tankers this year. What those demoralized owners perhaps failed to foresee was a sudden surge in cargoes. With the U.S. poised to impose sanctions on Iran earlier this year, producers including Saudi Arabia and Russia began adding barrels to the market.
Between May and November, the world’s largest and second-largest exporters lifted their combined output by about 1.5 million barrels a day. American shipments are also soaring. As well as adding demand for vessels, the increased oil supply also drove down fuel prices — the industry’s single biggest expense.
For those owners who didn’t scrap, rates jumped more than threefold from late September to mid-December, according to Clarkson figures.
According to data from the Baltic Exchange in London, up in the North Sea, ships that move 600,000-barrel cargoes earlier this week were earning $72,664 a day, the highest in 3 1/2 years. At the start of December, giant 2 million-barrel carrying vessels were making $58,000 from delivering Middle East oil to China, the most since at least the start of 2017 and West African rates also surged.
Pact to Reset Global Crude Production
In transportation capacity terms, this year’s scrapping is the highest since 1985. But the surge in earnings doesn’t mean owners were wrong to demolish — even if some might have benefited from waiting a little longer to do so.
The Organization of Petroleum Exporting Countries and allied producers announced on December 7 that they would reset a pact to limit global crude production starting in January, restricting the flow of cargoes and potentially bolstering fuel prices. Saudi Arabia is making huge cuts as part of that. That’s on top of major exporters Iran and Venezuela, whose output and exports have been crushed by sanctions and economic meltdown.
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