Splash Extra

Tanker owners with empty pockets

Cash made during quick highs last year has been flushed away.

Recalling this time of year only 12 months ago brings wide smiles to everyone’s face in the oil tanker business. Amidst a Covid-19 pandemic, the oil tanker market worked long hours in the gold mine. At present, the rain cannot stop from falling and what was set aside during the 2020 highs is now spent – but not only to cover daily losses in the freight market – money has also spent on secondhand assets.

A month of ups

Chinese crude oil exports went up by 2m barrels a day in March over the same period last year. The most important crude oil import market has solidly recovered from the Covid-19 weakness to roar back. As India struggles with 300,000 Covid-19 cases a day – the other main crude oil importer in Asia is stuttering just to establish some sort of recovery.

The insightful readers of Splash Extra will notice that imports from Iran are nowhere to be found in the Top 10 chart, nor outside of it. That is because China has not imported any crude oil from Iran recently to honour the US sanctions against the regime despite what less insightful outsiders may conclude or read about in less well-informed titles. The truth is that China continues to support the puppet leadership in Teheran as it keeps on buying – but without recording it in custom statistics. Increased volumes from Malaysia and UAE most likely covers up a part of it.

Worth noticing too is it that China has increased imports from long-haul origins like, Brazil, the United States and even the United Kingdom. Pro bono, Splash Extra advises China to please keep it up as it underpins VLCC tanker demand.

And downs

Despite the high volumes of crude oil being shipped to China from the Persian Gulf, the key bell-weather trade lane, known as TD3-C, has averaged $-1,351 per day, since freight rates on the that route turned negative on January 19 this year.

What is also declining during these months are the OPEC+ nations’ oil production cuts. And while Splash Extra continues to be impressed by the cartel’s ability to hold the line, the fact that tapering the production cuts is regularly being postponed also means that the surpassing of pre-pandemic oil and tanker demand levels is far away.

Going down is also owners’ appetite to sell ships for demolition, after March provided for a 33-month high with 18 tankers dismantled albeit that the combined capacity of the tankers was no more than 1.34m dwt, an insignificant amount. Splash Extra ponders when the exodus will happen, as deceiving analysts from various financial institutions have claimed it’s imminent for so long.

And turnarounds

The Ever Given provided a brief moment of oxygen for the stressed-out oil product tanker market. But little did it matter. The sugar-high was a disruption rush lasting only half a month. Towards the end of April earnings were back in the sub-$10,000 per day trench that they had lingered in prior to the Suez Canal blockage.

One that never turned around was John Angelicoussis – an angel who always aimed for the top. The worlds’ fourth largest capesize and VLCC owner and second only to Mitsui OSK Lines in LNG is no more. All honour to his memory.

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