Very large crude carrier (VLCC) owners and operators are in for a bleak year according to the market analysts and financiers congregating in Dubai today.
Speaking at the Marine Money Gulf Ship Finance Forum, fund directors, owners and shipping analysts painted a sorry picture for the midstream oil and gas shipping sector.
“Headwinds are starting to gain force as fleet growth rises and tanker demand slows on the back of sharp OPEC cuts,” said Erik Helberg, head of shipping research at Pareto Securities ASA.
The VLCC market has been hit hard in 2009 as OPEC production has fallen rapidly and refinery utilisation in the US and European markets has dropped significantly. In February the IEA revised its global demand forecast down, estimating a fall in crude demand of 1.0 million barrels per day, or a 1.2% reduction.
“The biggest fear in the tanker sector is an accelerating Asian downturn. That, coupled with the fact that US crude inventories currently show a surplus of 80 million barrels above the nominal 5 year average, would be very bad news for owners. Ultimately lower volumes translate into lower utilisation and revenues,” added Helberg.
As tonnage laid down in 2007 and 2008 comes onstream, fleet growth rates are starting to rise, which doubles the trouble for owners.
“The tanker market is exiting a 10-year bull period which will be quite painful for owners, but let’s not forget the crude tanker market had an exceptional 2008. For 2009 we estimate that utilisation could drop by as much as 10 points, putting it in the high 80% bracket, down from the high 90s.”
“Last year few people would have predicted that the demand side of the equation would have fallen off a cliff. The fall in containerised shipping was precipitated by the global economic downturn, and predictions are that the tanker market might be next,” added Jonathan Hill, managing director of shipping funds, Tufton Oceanic Middle East.
It’s not all doom and gloom though. Single-hull scrapping in line with IMO directives will rise in 2009 and limit the downturn somewhat. “The outlook for fundamentals in the medium to long term (three years plus) may, overall, have actually improved, as no new tonnage will be laid down now, and some capacity building projects will be scrapped in the current climate,” said Helberg.
