Tanker Demand Weakens, Says Euronav
Demand forecasts in the tanker sector have weakened modestly over 2019 with the three core agencies (IEA, EIA and OPEC) cutting 2019 demand growth forecasts from 1.4m bpd to 1.2m bpd, says Euronav.
The crude oil tanker company noted that this remains above the long term trend growth average of 1.1m bpd (since 1990).
Asset values continued to improve primarily in the second hand market where prices for 5 and 10 year old very large crude carriers (VLCC) and Suezmaxes are back at Q1 2016 levels.
Clearly the decision by OPEC to extend their self-imposed production cuts of 1.2m bpd to the end of Q1 2020 provides a challenging background for the wider tanker market.
At the same time, US crude exports have continued to offset this negative trend with Q2 posting another quarterly record high volume of oil exported from the US.
"The recent attacks on crude tanker tonnage in June and July in the Arabian Gulf have naturally led to instability and increasing risks in the region and Euronav has along with most of our peers taken precautionary actions in order to protect our staff whose safety remains our priority," Euronav said.
Vessel supply is arguably the most important factor driving the tanker sector, it said.
The restraint in ordering of large crude tankers (VLCC and Suezmax) since the start of the year is welcomed and is encouraging. Since early January only one VLCC order has been confirmed with the rolling 12 month order flow for VLCC running at six year lows, it added.
"We believe that the uncertainty around future propulsion systems and the fuel they equire in line with the long term greenhouse gas (GHG) reduction set by the IMO for 050 should contribute to further ordering restraint," said the report.