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During January 2021, oil prices have risen to seven-year heights as traders gamble that demand for crude oil could outstrip supply later this year. Both Brent and WTI have added nearly 15% in January. Plenty of oil market analysts are forecasting that the prices will hit $100 per barrel unless or until oil supplies increase. Their bets are based on an assumption that the global economy will continue to rebound from the pandemic during 2022. As swathes of the global population remain in various forms of lockdown, how can this be? Surely global stocks will be sufficient to cover any shortfall in refinery output until refinery capacity utilisation can increase and until shale oil producers in the US and low-cost producers in OPEC nations can open the spigots wider? Apparently not. US crude oil stocks are at 418m barrels, near the lower end of their five-year range. Goldman Sachs traders reckon that global oil inventories are down to their lowest levels this century. Has the clean tanker market fared better as it did during 2021? Alas, no. The US government has called on OPEC to increase output. The US EIA thinks that OPEC has up to 4m barrels per day of spare production capacity for this and next year, and wants OPEC to get on with putting that oil on ships to keep the prices down and put a lid on inflation. VLCC owners are presumably very much of the same opinion. The US has not similarly implored Russia which is back on the naughty step. Nobody is talking about sanctions on Russian oil exports should it expand its military adventures in Ukraine, but any disruption to Black Sea exports would put pressure on the global oil markets, adding to price inflation and potentially damaging demand. Meanwhile, US shale producers are keen to demonstrate that rumours of their demise have once again been premature and incorrect. Indeed, the EIA expects US fossil fuel production to reach new highs in 2023, even as ExxonMobil becomes the latest (and it is very late) oil and gas producer to announce a zero-carbon fossil fuel production target by mid-century. Assuming that Russia does not kick off World War Three in the next few months, there should be hope for the tanker market - at least for those who survive the current freeze. Amid all this speculation, the month to January 21 has been a cold and sober one for most tanker operators. The Baltic Dirty Tanker Index briefly flickered in December, with numbers kindling up into the low 800s before the Ghost of Christmas Lockdowns blew out the candle. January began with the BDTI at 722 and it has headed downhill gently since, to 690 on January 20, a fall of 14%. In dollar terms, the Baltic’s VLCC time charter average remains determinedly in negative territory at an average of $-12,800 in January compared to $-8,638 in December. As usual, brokers calculate higher numbers. Clarksons Platou suggests VLCC eco ship rates are below $10,000 per day – about opex levels, while Howe Robinson suggests non-eco VLCCs are losing $2,200 per day on the Mid-East to South Korea run. Tanker specialists Poten and Partners rate a VLCC Mid East to Far East at $-1,900 per day in mid-January compared to an annual average of $-1,000 for 2021. Suezmaxes and aframaxes are hurting too. The suezmax average TC as reported by the Baltic Exchange fell from U$5,628 in December to $-2,301 for January to the 20th and $-2,480 on the 20th, while their aframax TCE fell from $9,047 for December to $5,943 for the first 20 days of January and just $3.146 on January 20. Brokers report that business in the Atlantic is "entirely absent", with crude oil tankers circling in the Middle East in the hope of cargo growth some time soon. Has the clean tanker market fared better as it did during 2021? Alas, no. The Baltic Clean Tanker Index peaked at 856 points on December 15. It opened in January at 675 points and downhill slalomed to 558 points on January 20, giving up 35% in a month. Still, that’s better than the annual average of 518 points for 2021. The benchmark TC1 route for an LR2 sailing from the Mid East to the Far East averaged $10,801 in December but has retreated to $3,621 for the first 20 days of January and turned negative on the 19th, slumping to $ – 2,093 on the 20th. It was briefly negative in February and July last year. The Atlantic average for MR tankers enjoyed the first half of December, peaking at $19,046 on the 14th. But it began 2022 at $12,564 and halved to $6,780 on January 20. The panamax route from Jubail to Rotterdam, TC8, averaged $9,984 on December 21 but could not breach $10,000 and stood at $1,387 on January 20, giving up 86% of its value in one month. The tanker slump continues. It is global and, for owners, it is painful to have to tell shareholders that the next quarter is going to be even worse than the last.

Tankers: A tragedy in two acts

There’s still little reason for hope.

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