2019 has proven to be just as hard as 2018 for tanker owners, but for a whole new set of reasons. While last year was characterized by shipping’s own shortcomings, as a result of an imbalance between supply and demand, 2019 is proving to be the year of geopolitical uncertainties, which are having a diverse impact in various trades around the world. In its latest weekly report, shipbroker Gibson said that “2019 so far has proved to be a year dominated by geopolitical events. The US Administration has placed sanctions on both Iran and Venezuela in a bid to reduce crude exports to zero. Tanker sabotage and disruption in the Middle East Gulf has pushed insurance premiums up and led to some shipowners to avoid the region. Potential disruptions to Libyan supply remain. The US-China trade war has threatened to generate an economic slowdown, adding further market uncertainty. Crude prices have ebbed and flowed, touching highs of $74.57/bbl in April and lows of $54.91/bbl in January as both supply, demand and geopolitical signals vie for supremacy”. According to Gibson, “OPEC production cuts have remained a challenge to tanker demand throughout the year and subject to the outcome of next weeks meeting are set to remain in place. However, supply is rising from the US. Total US production was over 12 million b/d at the end of May according to the IEA, an increase of almost 14% from the same period last year. Latest data shows US crude production is up 1.5 million b/d as of the end of May compared to the same period last year. The US shale revolution has continued to surge on with some analysts predicting production growth in 2019 could climb an extra 1.2 million b/d – or 16% – for the full year. Much of this has flowed down to the US Gulf via new pipeline capacity with over 500,000 b/d of extra pipeline capacity now reportedly flowing in the first half of 2019 and an additional 2 million b/d of further new capacity due to come online in the second half of this year. US Gulf exports are also up with over 2.5 million b/d loaded in May, over 1 million b/d more than the same period last year according to Clipper Data. Much of the growth in production has covered the emphatic fall in Venezuelan and Iranian barrels. According to the IEA, Venezuela produced just over 800,000 b/d in May – down from 1.4 million a year ago, moreover Iran’s production fell to 2.4 million b/d in May, a fall of almost 1.5 million b/d from the same period in 2018”. The shipbroker added that “June also saw an improvement in VLCC tanker earnings after briefly dipping to lows for the year. TD3C fell to WS36 in May before tensions in the Middle East saw several vessels sabotaged over the space of a few weeks. The unease in the region meant some shipowners were unwilling to do business in the region whereas insurance premiums saw an increase that were passed onto the charterer pushing rates up to WS52 and TCE’s to almost $25,000/day, up from lows of around $9,500/day in April and May. Another unforeseen event saw the 335,000 b/d Philadelphia Energy Solutions refinery explode, briefly pushing up June TC2 rates from yearly lows of WS100 by 60 points to WS160”. Meanwhile, “on the vessel supply side, 2019 has seen 39 VLCCs already delivered, the highest number Gibson has on record in a 6-month period. So far only 26 tankers above 25,000 dwt have been sent to recycling yards this year, significantly lower than 2018. Scrap prices remain relatively firm, however the potential for better returns and a stronger market have tempted owners to retain tonnage in anticipation for 2020”, Gibson said. “As we enter the second half of the year, many are gearing towards new IMO 2020 regulations. Many shipowners have made their intentions known as to whether they will fit scrubbers or not. Presently it is estimated that up to 3,500 vessels will be fitted with scrubbers by 2020, with VLCCs potentially having 30% of their total fleet scrubber fitted. Many refineries have been preparing to start supplying compliant bunker fuel from H2 2019, although it is expected that gasoil will be the dominate bunker choice heading into 2020, with uptake of low sulphur fuel oil set to increase over time. Most regions are expected to supply a 0.5% fuel by 2020, however the quality and quantity remain uncertain. Heading into the second half of the year many challenges and opportunities remain. Navigating IMO 2020 is perhaps the biggest unknown. However, deliveries should start to slow down into 2020 as the orderbook is falling and scrapping starts to increase. If the global economy weathers current headwinds and US crude production fails to disappoint we could – as mentioned in our end of year 2018 report – be in for another rollercoaster ride, currently we are on the waltzer and we’re mid spin”, Gibson concluded.
2019/7/1 2:24:27