Oil tanker industry is in an ocean of trouble

So far this year, more than enough has been written about the crises of various sectors of the oil industry and related industries. But there is an industry that really thrives during the worst times of the crisis: As the world was sunk in oil amid oil demand and excess supply, tanker owners enjoyed a surge in freight rates as these ships were unsafe Remained the only storage place for crude oil.

But things have changed.

OPEC + oil production cuts helped bring down global inventions, including large amounts of oil in temporary storage. This reduced freight rates for a very large crude carrier to more than $ 250,000 per day to less than $ 30,000 per day, leaving tanker owners wondering how long they could survive now. Right now, he has an expectation, exactly like air travel: a successful commentary.

The demand for oil is out of the window due to the epidemic and no one is telling when and what is coming back. Yet it is very easy to link rebound to economic activity around the world with rebound in oil demand. However, this rebound is largely dependent on vaccination.

Shipbroker Gibson said, “The industries that Kovid-19 has hit hard, have long shipping, of which only one has many casualties.” Hellenic Shipping News, earlier this week. “Although spring reached an unprecedented height between delay in tanker rates and temporary storage demand, today’s market is very different, now TCE earns on many trades at or below OPEX for a few months.” Related: OPEC + Complaints with Oil Production Reduction in August by 101%

Interestingly, the demand for tankers for storing oil offshore is increasing. In fact, Lloyd states that the demand for tankers for temporary storage could be the single driver of demand for the industry in the next quarter. Unfortunately, this does not mean that freight rates will reach a high level in the first half.

Greg Miller, senior editor at American Shipper, wrote that the spot rate for very large crude carriers was $ 27,900 a day on Monday. This is far below the $ 68,000 average freight rates for the first half of the year and yet it is a massive, 124 percent improvement over Monday of last week. The demand for floating storage is helping tanker owners succumb. But it can take any better time.

John van Schaik of Energy Intelligence earlier this month gave traders and producers about 1.3 billion barrels of raw as stored during the first five months of this year. Those were good times for tankers. But then OPEC + started cutting production and floating and onshore-storage withdrawals at the rate of 100 million barrels a month. The easing of lockdown helped improve oil demand, although it was weak. But it is not enough.

Even their production cuts of OPEC + did not help. Bloomberg wrote in July, the cut had decreased by 2 million barrels per day in the month before, that the world markets would have been good news for any year other than 2 million bpd if it cut production to 9.7 million bpd for three. Was not before. Months ago. The demand for ships for temporary storage was also on the decline at the time, removing the demand for this source for tankers. And to add insult to injury, the largest producers in OPEC +, Russia and Saudi Arabia, were keeping most of the excess oil they were producing for the domestic market, at least because of unfavorable prices. Related: Oil rises after confirmation of EIA crude inventory draw

As if this wasn’t enough bad news, there’s more. Although VLCC’s growing demand for floating storage continues to grow, there is still plenty of oil stored by traders and producers in the spring, Freightwaves Miller said. According to Kepler figures, near the coast of China, there are about 67 million barrels in storage alone. This means that the new demand for offshore storage will be limited as per requirement, a limit will also be set on freight rates.

Brent crude is trading at just under $ 40 a barrel, after last week it fell below this threshold renewed about future demand. WTI is trading below $ 39 per barrel. There are over 170 vaccine candidates at various stages of development worldwide. Nine are in an advanced stage of testing. Hopefully we can get a working vaccine before the end of the year, though medical experts are warning against too much optimism.

Vaccines are the only thing that can save the tanker industry right now. With effective vaccination and mass vaccination, air travel will begin to recover. If the air travel starts recovering, then overall the demand for oil will increase. Nevertheless it is worth noting that this will not happen overnight, even in the best condition where a vaccine becomes widely available before the end of this year. Tanker owners have more trouble before returning to a normal boom-and-bust cycle-like situation.

By Irina Slavin for oilprice.com

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