Recovery in Asian refinery margins following a sharp fall in July and an expected increase in the demand for oil produced by OPEC members (and thus carried by sea to customers) are both good news for VLCC owners, shipping analysts in Norway said.
When Asian refinery margins fell sharply during July, it was natural and expected that there could be cutbacks in runs, reducing demand for crude oil. Consequently, VLCC spot rates started to fall and went from about USD80,000 to USD20,000/day over the course of a few weeks, said shipping analysts at Pareto in Oslo.
“Since, thanks to both less Middle Eastern product exports (due to more domestic consumption) and lower oil prices, refineries in Asia have seen margins increase again, and as they prepare for peak season in November, activity has once again started to increase,” said Eirik Haavaldsen and Oystein Dalby, the Pareto analysts, in a weekly market report emailed to IHS Maritime.
“VLCC rates are currently around USD50,000/day, which is roughly three times the level we saw a year ago. We believe now is the time to buy crude tankers, with combined refinery runs in Asia (not including the Middle East) expected to be up by about 1.1million barrels per day (bpd) in the fourth quarter of 2015 versus 2014,” they pointed out.
Meanwhile, OPEC’s monthly oil market report published on Monday, the organisation revised down its world oil demand growth forecast for 2016 by 50,000 bpd to 94.08 million bpd on the back of slower economic growth in Latin America and China, said Kurt Waldeland and Erik Nikolai Stavseth, shipping analysts at Arctic in Oslo, in a daily market report.
‘World oil demand growth for 2015 was revised up 84,000 bpd from the previous report to 92.79 million bpd as OECD demand grew more than expected in the first half of this year. On the supply side, the secretariat cut its non-OPEC supply forecast this year by 33,000 bpd to 57.43 million bpd as oil prices below USD50/barrel are weighing on high-cost production – primarily US shale,” they said.
OPEC also revised demand for its crude up by 100,000 bpd for 2015, to 29.35 million bpd and the figure for 2016 further up to 30.3 million bpd, an increase of 200,000 bpd.
“The increase in demand for OPEC crude could add to the total volumes of global seaborne crude – supporting crude tanker demand. Current crude tanker freight rates have rebounded from the drop seen late last month, and is now quoted above USD50,000/day. As we expect increased seasonal demand for crude oil into the winter months, we anticipate crude tanker freight rates to strengthen towards year-end and could see earnings reach the record highs seen this spring,” they concluded.