Rising oil prices will not help the tanker sector, according to the latest Tanker Forecaster from Drewry Shipping Consultants.
“The economic turbulence and the subsequent impact on oil prices have dealt a double blow for this sector,” says the editor of the quarterly report, Parul Bhambri. “Oil demand has fallen for a fifth consecutive quarter. Job losses and mounting credit woes mean that people are travelling less and trying to cut their energy bills. And while low oil prices have failed to stimulate significant extra demand, they have persuaded oil companies to delay projects, while a few have scrapped expansion projects altogether,” she explains.
According to the International Energy Agency (IEA April 09), upstream investments in the oil industry could be reduced by 15-20% in 2009, which would lead mature field output to decline by a sharper 9.4%. So in addition to deferred expansion plans, current output would also decline at a higher rate than previously envisaged. This could spell trouble for the global economy when demand picks up again.
OPEC is nervous about cutting output again because there is the potential to push oil prices above $100 and towards $150/bbl, killing global economic recovery.
“So it is easier to understand why we have taken a pessimistic stance on tanker freight markets through 2010 and until mid-2011,” says Bhambri. However, there are reasons to be less pessimistic in the medium term, she believes.
“While the supply-and-demand equation points to an even larger gap in 2012, we do believe that the tanker market will gradually fall into line with the cyclical trend and rates could be bolstered as sentiments become firmer. Also, a protracted weakness through 2009 and 2010 could persuade owners of single-hull vessels to scrap rather than put them through special survey, despite exemptions granted by a number of Asian countries.”
