January 11th 2017
OPEC production cuts and continued fleet growth have led Seaport Global to pull down its tanker rate expectations for 2017.
Analyst Magnus Fyhr is projecting a strengthening of the market next year with limited newbuilding activity helping to balance the market after 2018.
Fyhr explains a reduction in OPEC crude oil exports will impact crude tanker demand during the first half of 2017, leading to his downward rate revisions.
In a report released today, the analyst reset his VLCC rate forecast for this year at $25,000 per day, below the $31,000 per day he had previously charted.
While Fyhr notes OPEC has a questionable track record on complying with quotas, should Middle East exporters cut production by one million barrels per day from October levels, demand will fall by between 10 and 20 VLCCs.
Public shipowners are unlikely to need fresh equity but should rates fall below $25,000 per day scrapping is likely to accelerate, he suggests.
Seaport, which counts 28 VLCCs over 20 years of age on the water, projects seven VLs will be scrapped in the next 12 months alongside eight suezmaxes.
Looking into 2018, Fyhr is forecasting VLCC rates to rise to $30,000 per day, with limited ordering and a rebalancing of the oil market expected to bring healthier conditions further forward.
Clarkson’s presently counts 100 VLCC newbuilding’s on order, of which 53 are earmarked for delivery in the coming year.
“As we move into 2019, we expect the fleet growth to be minimal assuming ordering activity remains subdued in 2017,” Fyhr wrote.
“In addition, given increasing financial difficulties for many Chinese and Korean shipyards, we believe non-deliveries will continue to run at elevated levels with many orders ending up being cancelled,” he said.