Rising global crude oil production will be matched by a wave of new tanker deliveries over the next two years, but shipowners’ profit margins will become even slimmer, according to new research by Drewry.
Crude buyers worldwide have been busily restocking national oil reserves while the oil price stays low – both Brent and WTI crude are both currently trading at below $50 per barrel. This has slowed US shale oil production and boosted tanker demand, especially on long-haul trades.
Freight rates for dirty tankers have enjoyed a bull run throughout the summer as demand has outstripped low net fleet growth, but Drewry says this upward trend of vessel earnings will be shortlived.
“Drewry expects annual growth in the crude tanker fleet to accelerate from 0.7% in 2014 to around 5% over the next two years, to reach 377m dwt by the end of 2017,” said Rajesh Verma, Drewry’s lead analyst for tanker shipping. “However, this growth is expected to recede thereafter, assuming vessel ordering remains controlled.
“A total of 42m dwt of capacity has been ordered since 2014, which compares with just 25m dwt in 2012-13, when a bearish freight market and tight credit availability checked ordering,” he continued.
Tanker demand will grow further in the coming years with increases in Asian refining capacity and a possible end to the ban on crude from the US, the London-based consultancy said. The expected oil supply growth has been reflected by the high number of orders for large tankers.
The picture becomes much brighter after 2017, Drewry said, but only if shipowners can learn from the lessons of the past.
“So long as shipowners abstain from excessive ordering in the coming years, we can expect fleet growth to slow after 2017, which in combination with the prospective increase in global oil trade will lead to some longer term recovery in crude tanker earnings,” Verma noted.