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Author Topic: Crude oil tanker oversupply manageable, but should be eliminated  (Read 564 times)
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Hannes van Rijn
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« on: November 04, 2017, 04:54:28 am »

The tanker market is oversupplied by about 30 to 40 VLCCs and 20 to 30 Suezmaxes, but the sooner this can be eliminated, the sooner freight markets will recover, Paddy Rodgers, CEO of the Antwerp-based tanker giant, Euronav, told Fairplay.

“If we can see our ‘bathtub’ move into a better balance via a net reduction in the global fleet then the inflection point in the cycle will come quicker,” Rodgers said.

By the bathtub he referred to the age profile of the VLCC and Suezmax fleets. Most of the tonnage is modern, which gives the profile a high and broad bulge above a narrow base that represents ageing vessels.

The same applies in reverse to the newbuilding orderbook, as most of the crude oil carriers are due to enter service in the next two years, with little supply due after that year.

As far as VLCCs are concerned, Euronav expects 48 deliveries in 2018 followed by 33 the following year. In the case of Suezmaxes, the figures are 33 and 9 respectively.

Neither the oversupply nor the orderbook appear huge when compared to the existing fleets in these two size categories.

Figures from the IHS Markit database show that there are 716 VLCCs with a combined dw tonnage of 220.0 million currently in service and that the present day Suezmax fleet consists of 515 ships that have a combined tonnage of 80.3 million dwt.

The demand for crude oil remains robust. Euronav pointed out in its third-quarter interim report that the IEA had raised its 2017 global oil consumption growth forecast to 1.6 million bpd from 1.2 million bpd during the course of the year.

The company has calculated that the 1.6 million bpd growth in demand creates work for 49 VLCC equivalents, whereas the 1.2 million figure only brings work to 37 units.

Euronav has based its calculations on factoring the carrying capacities of VLCCs and Suezmaxes into a synthetic concept of VLCC equivalents to facilitate projections of future tonnage need and supply.

Despite the current benign demand situation, removal of ageing vessels remains high on the agenda of the Euronav top brass as Hugo de Stoop, CFO, stated in the company’s third-quarter interim conference call. “If the market becomes considerably better, that will absorb the new tonnage little bit faster but we continue to insist on saying that the old ladies can go,” he said.

Likewise, owners should refrain from ordering tonnage that would be surplus to requirements. “The duration of a challenging freight rate environment will remain dependent on the number of additional newbuild orders that are not needed by the market,” Euronav said in its third-quarter interim report. “Scrapping/fleet removal trends need to be extrapolated further before an inflection point can be reached.” 

Continued high pace of newbuilding orders combined with a slowdown in demolition sales, could in an extreme case, have very negative consequences. The present low freight rates result from oversupply of tonnage, not weak demand.

However, should the global economy start to encounter headwinds and the demand for oil weaken, the tanker industry could steam into the next recession with a vast oversupply of tonnage, according to Rodgers.

“Again, anything is possible and clearly demand will be impacted the higher the oil price goes; we think it remains demand stimulative to around USD70 per barrel but the recent rise has been based on strong demand as well as restricted supply.”

Source IHS
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pieter melissen
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« Reply #1 on: November 04, 2017, 05:51:50 pm »

Quote "Likewise, owners should refrain from ordering tonnage that would be surplus to requirements"

Either an optimist or a rather naive shipowner.
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Captain Ted
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« Reply #2 on: November 05, 2017, 02:38:38 pm »

I agree with Pieter
But the US economy is on a roll,,,and it seems by relaxing more and more enviromental regulations all stops and plugs are pulled. It will last a while and usually when the US economy rolls the world economy benefits too.
However, once it hit the wall at the next crash which will come for sure, that crash will be worst than anything else experienced before. The shipping industry will of course benefit too, but the landing will be rough and unforgiving !!!!
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NOW!!!,,,if we could get rid of the sailors,,how safe shipping would be !!!!!!!!
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« Reply #3 on: Yesterday at 09:38:51 am »

How would someone go about investing in one of these vessels operated by Euronav?

Isn't there somewhere you can buy a share in the cargo being shipped or own a share of a vessel so one may benefit in the upturn of business ?

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