OPEC’s decision to maintain current output levels, with the announcement made last week by Saudi Arabia following the meet in Geneva, comes as good news for the tanker market in the Middle East says Morgan Stanley.
The US-based financial group in a report following the meeting said that the lack of desire among OPEC’s 12 member states to create balance in the oil market will ensure a strong freight market and help keep oil prices down.
These two factors will then drive demand for oil further, in turn creating greater demand for VLCC supertankers, the rates for which are seeing sustained record levels.
With a potential agreement between the five economic superpowers, led by the US and EU, concerning Iran’s nuclear program, expected to conclude by the end of the month, analysts are predicting further supply of oil to the market as sanctions against Iran are eased or dropped.
According to Morgan Stanley, Iranian oil will not flow into the market right away but will drive demand for VLCC tankers further as oil traders store Iranian oil at sea in anticipation of an oil price correction.
Storing oil aboard tankers at sea will give traders better access to the market for a quick profit once the oil price rebounds.
This has had a dramatic effect on new building orders, with Greek ship-owners alone having spent US $1.4-billion in March and April (almost half of total spending for the period) on new tanker orders in anticipation of greater demand for oil in the coming years.Â
