The scenario
Crude tanker rates have plunged since the start of 2016. VLCC (very large crude carrier) rates on the route from the Arabian Gulf to China were sitting high at $108,000 per day at the beginning of the year.
This trend could not continue. After a few months, rates fell by 82% to $19,000 per day toward the end of August, according to the Weber Weekly Report. Suezmax rates have fallen 97%, and Aframax rates have fallen 56%. Even after this dreadful fall, Tsakos Energy Navigation’s (TNP) management remains positive about the crude tanker industry’s outlook.
The following are points Tsakos mentioned in its second-quarter conference call. These comments will help to gauge the outlook of the crude tanker industry and companies such as Teekay Tankers (TNK), Euronav (EURN), DHT Holdings (DHT), and Nordic American Tankers (NAT).
- In 1H16, there were many export disruptions from Nigeria, which affected the Suezmax trade. Nigeria is one of the world’s largest exporters of oil. Tsakos explained that these disruptions have been ironed out, and Nigeria will once again resume full exports, which will benefit the tanker industry.
- Many countries are using up their inventories. There has been a strong fall in inventories in the United States. This is another good sign for the industry.
- The upcoming winter season is expected to see a rise in crude oil trade.
- World oil demand continues to remain strong. International energy agencies have made upward revisions to their 2016 global oil demand figures.
- OPEC (Organization of the Petroleum Exporting Countries) continues to produce oil at record highs, reaching 33.5 million in August mainly due to the production increases by Iran and Iraq. Tsakos believes that the oil supply will remain elevated going forward.
In a nutshell, considering all these points, Tsakos believes that 2016 will be another positive year for crude tankers.
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Source: Market Realist
