Tanker own­ers to ben­e­fit from OPEC’s pol­icy of low oil prices

Financial Mirror (Cyprus) - - FRONT PAGE -

VLCC (very large crude car­rier) tankers will likely keep their up­ward tra­jec­tory as the re­cent OPEC decision to keep the oil taps flow­ing means that oil prices will re­main low for the time be­ing, pun­ish­ing some pro­duc­ers. How­ever, at the same time, low oil prices will stim­u­late con­sump­tion, ul­ti­mately en­cour­ag­ing crude move­ments, wrote Nikos Roussanoglou on Hel­lenic Shipping News.

Cit­ing data from ship­bro­ker Gib­son, “2014 has seen a marked im­prove­ment in sen­ti­ment, with many sug­gest­ing that we may have seen the bot­tom of this par­tic­u­lar cy­cle. The for­tunes of the VLCC owner can be judged from the 12 month re­turns for VLCCs fixed be­tween June 2011 and June 2014. This av­er­aged $20,500/day, com­pared to around $32,500/day cur­rently com­manded by a mod­ern non eco unit”.

Ac­cord­ing to the ship­bro­ker, “the fre­quent vo­latil­ity of the spot mar­ket dur­ing 2014 has sig­nif­i­cantly in­creased the con­fi­dence of shipown­ers who have been strug­gling with low re­turns since the be­gin­ning of 2011. Own­ers have as a re­sult shown a greater ap­petite to take their chances on the spot mar­ket to re­build their war chests but will this be the right tac­tic for 2015? We have seen some VLCC own­ers de­cide that a $30,000 level is the tip­ping point for them and have cho­sen to lock in at this level for 12 months time char­ters. The av­er­age De­cem­ber 2012 spot was $24,750/day, in De­cem­ber 2013 the fig­ure was $45,500/day and as of to­day it is $53,000/day and weak­en­ing”.

Gib­son added that “the earn­ings po­si­tion for the own­ers has of course been con­sid­er­ably en­hanced by the fall in bunker prices. In the last two years the VLCC mar­ket has been adapt­ing to a change in trad­ing pat­terns re­sult­ing from a de­cline in im­ports of crude to the US and in­creas­ing de­mand from the East. The longer voy­ages from West Africa and the Caribbean to Asia Pa­cific in­evitably throw up sched­ul­ing is­sues for char­ter­ers with ton­nage be­ing out of po­si­tion or in short sup­ply. This sit­u­a­tion is likely to be com­pounded next year with fewer voy­ages tak­ing place to the US which will make pro­gram­ming lift­ings ex Caribs even more prob­lem­atic”.

Mean­while, in the ton­nage sup­ply fac­tor, Gib­son noted that “VLCC new­build­ing de­liv­er­ies have been very much un­der con­trol with 24 be­ing the fi­nal to­tal for 2014 and a fur­ther 23 sched­uled for 2015. There will also be some scrap­ping and limited con­ver­sions which will help the bal­ance, so th­ese statis­tics look pretty favourable from the owner’s stand­point. How­ever, the pic­ture changes in 2016 with some 54 de­liv­er­ies cur­rently on the radar, some­what more sig­nif­i­cant. This year has also seen fur­ther con­sol­i­da­tion of the VLCC fleet. For ex­am­ple, Front­line and Tankers In­ter­na­tional en­tered into a joint ven­ture which en­com­passes some 62 Tankers trad­ing on the spot mar­ket. This equates to ap­prox­i­mately 10% of the cur­rent fleet, and an even greater share of the spot VLCC mar­ket. The the­ory is that th­ese big­ger fleets have greater bar­gain­ing power to achieve bet­ter rates”. Fi­nally, the ship­bro­ker said that “there has been a great deal of dis­cus­sion about the con­tango struc­ture in oil prices which un­til now has not been step enough to stim­u­late much tanker stor­age. How­ever, once we have gone into 2015 there may come a point when the rapid build-up of sur­plus crude in the mar­ket will open op­por­tu­ni­ties for float­ing stor­age. This sce­nario is a fur­ther pos­i­tive for VLCCs”, Gib­son con­cluded.

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