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