Extended oil production cuts by Saudi and Russia do nothing to diminish bullish tanker forecasts
News that Saudi Arabia and Russia have decided to extend their production cuts has been seen as a short-term negative development for tankers, but not a game-changer.
Saudi Arabia and Russia have announced plans to maintain their voluntary crude production cuts of 1.3m barrels per day for the remainder of the year, but will re-assess with each passing month.
Joakim Hannisdahl-led Gersemi Shipping Fund now expects Saudi to increase supply for November, in concert with the seasonal uptick for oil tankers. In a note to clients, Hannisdahl said his investment thesis on tankers is not contingent on when Saudi halts its unilateral cuts as the current supply draw cycle will be followed by an inventory build cycle, assuming oil demand does not collapse, which will most likely add to an already “very tight” oil tanker market.
Analysts at Jefferies suggested the cuts would likely defer any tanker rally in Q4, but instead create a rate “eruption” in 2024.
“We are growing increasingly confident that 2024 will be a banner year for tankers,” Jefferies suggested in research note to clients.
“The sector is positioned to start next year with a tight oil market balance that will likely create a sense of urgency underpinning the spot market for much of 2024,” Jefferies predicted.
Meanwhile, the tanker fleet is expected to remain mostly static with newbuilding deliveries adding a “historically low” 1% of additional capacity, including only one VLCC, Jefferies added, meaning the combined tanker fleet of both crude and products can reach 90% utilisation in 2024, up from 88% for 2023 and 84% for 2022.
Splash reported last month on a report from Kepler Cheuvreux forecasting VLCC utilisation will hit an unprecedented 99% by 2025 with suezmax utilisation heading into similar unchartered territory, hitting above 98% by 2025.
Analysts at BIMCO, the world’s largest shipping organisation, have also just given their tanker predictions for the coming 15 months. BIMCO is forecasting that the crude tanker market will see cargo volume growth of between 2% and 3% in 2023 and between 3.5% and 4.5% in 2024. With average sailing distances increasing, BIMCO estimates tonne miles growth of between 5% and 6% in 2023, and between 5.5% and 6.5% in 2024.
During the first eight months of 2023, 57 aframax/LR2s, 69 MR2s, 40 suezmaxes and 11 VLCCs have been ordered, according to data compiled by Xclusiv Shipbrokers. This compares to 20 aframax/LR2s, 31 MR2s, two suezmaxes and three VLCCs ordered in the same period of 2022.
Clarksons Research data shows tanker ordering this year is up 66% on the 2022 total with tanker owners finally playing a game of newbuild catch-up.
Despite the belated orders tankers remain a relatively rare sight at the world’s shipyards still.
Clarksons data shows tankers make up 25% of the existing global merchant fleet in gt terms but just 9% of the orderbook, having been elbowed out by boxship and gas orders.
