Is Oil Price Pain, Shipping Industry's Gain?
Tumbling prices and oversupply may be cause for concern in the oil industry, but shipping industry it can represent a window of opportunity.
A simple statistical data can put things in perspective for you: Two out of every three barrels of oil that are transported are moved around in ships. The remaining one-third is transported via pipelines. Therefore, the shipping industry plays a crucial role in the integrated oil business.
To start with, the cost of shipping could go down thanks to the current slide - this is what a study by Middle East's The National shows. Malaysia's MIDF Equities Research shipping sector is set to benefit from the current low crude oil prices.
It doesn't have a direct instant impact on shipping, but the situation augers well for maritime sector. DP World Chairman Sultan Ahmed bin Sulayem has cause for optimism. He says that the fall in oil price may stimulate particular economies such as India and China who are among the most energy-dependent countries, relying on overseas producers for much of their oil needs. When these engines of growth begin to rise so does the rest of the world. As a barometer of world trade our operations can benefit should there be an increase in trading activity, according to Ahmed bin's analysis.
Shipping companies are planning to replace these single-hull ships with double-hull ships, but as with almost anything that has to do with the commodities business, constructing these ships takes time. Therefore, the supply-side pressure on tanker spot rates will remain until these newly designed double-hull ships are brought onboard.
The sliding oil price has positive effect on the shipping industry, said Per Wistoft, chief executive officer of Dubai-based United Arab Chemical Carriers. He expects the profits of shipping companies to go up.
Bunkering costs have almost halved since last year and the demand for oil tanker has gone up, Wistoft pointed out. Bunkering costs of very large crude carriers also known as super tankers have come down from $40,000 per day to $20,000 per day. He says that this had been a substantial help for shipping companies to overcome the cost. Bunkering is one of the major expenses of the shipping companies. He predicted floating storage to increase due to low oil prices.
Operation costs of ships have gone down and demand for oil tankers have picked up as some countries like China try to stockpile oil taking advantage of the lower oil prices.
The number of supertankers sailing to China jumped to a record in ship-tracking data amid signs that the oil-price crash is spurring the Asian nation to stockpile. There were 83 very large crude carriers bound for Chinese ports, according to shipping signals from IHS Maritime compiled by Bloomberg.
Industry observers are of the opinion that the steep reduction in crude prices and continued output of crude has triggered stock building. They see cargoes being picked up to be put into storage in China predominantly.
