TANKER RATES EDGE UPWARDS BUT UNCERTAINTIES REMAIN
Brokers noted a number of off-market deals agreed during Bahri Week in Dubai and the signs, for the moment, are broadly positive.
Private deals agreed in Dubai last week moved rates upwards in owners’ favour with earnings on most routes in positive territory, according to reports. Brokers noted that rates to China from the Middle East and West Africa both showed significant improvements.
However, analysts are highlighting two factors that cast uncertainty over fundamentals for the large tanker sector. In its latest market report, Gibson noted that the International Energy Agency’s June forecast of 480,000 barrels per day (bpd) growth in Chinese oil imports this year has been revised downwards several times. Crude imports have actually fallen year on year, by 440,000 bpd.
Long-haul supplies to the country, in particular, have fallen back of late, with China sourcing more shorter-haul crude. Five years ago, the country’s crude imports from west of Suez totalled 3.8 million bpd compared with 5.2 million from sources lying to the east. So far this year, Gibson said the corresponding figures are now 3.1 million bpd and 7 million respectively.
Meanwhile, in its weekly report, Poten pointed to a second factor that could affect the tanker market. The US president-elect, Donald Trump, is a strong supporter of the country’s domestic oil industry and oversaw the replenishment of the country’s Strategic Petroleum Reserve (SPR) following the sale of barrels to generate revenue and reduce the federal deficit, the New York broker said. In March 2020, during the pandemic, he asked the Department of Energy to refill the SPR by purchasing an extra 77 million barrels of US crude.
Since President Biden has occupied the White House, the SPR has declined dramatically, Poten noted – from 638 million barrels in January 2021 to 346 million in July 2023. Since then, reserves have climbed some way, standing at 387 million barrels today.
Trump might well decide to refill the SPR but his strategy, of course, is not clear. A replenishment programme could boost the country’s energy sector but it would require careful management so as not to push up prices, Poten pointed out.
The potential impact on the tanker market depends on a range of factors, including its speed and whether the strategy is based on domestic production or a combination with imports. However, if the administration decided to buy crude at a rate of 500,000 bpd, it would take 500 days to bring the levels back to when Trump left office, Poten said, initiating a major boost to global oil demand.
Whether sourced domestically or combined with imports, an SPR refill would support oil prices and reduce competition from US exporters in the international market. But the impact on the tanker market would be uncertain.
Poten said that a reduction in US exports could force Europe to import more long-haul crude from the Middle East, for example, adding to ton-mile demand. On the other hand, reduced exports to Asia, if replaced by Middle East oil, would reduce ton-mile demand. Therefore, the outlook remains uncertain and only time will tell whether a refill of the SPR will help or hurt the tanker market, the broker concluded.
Ref: SeatradeMaritime News
