Tanker Market Insight November Research Department, Strategic Development

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1 Tanker Market Insight November 17 Research Department, Strategic Development

2 Nov-16 Dec-16 Feb-17 Mar-17 May-17 Jun-17 Aug-17 Sep-17 Nov-16 Dec-16 Feb-17 Mar-17 May-17 Jun-17 Aug-17 Sep-17 $ 000s / day $ 000s / day Monthly Summary October review: Rates were up across all segments in October as we entered the start of heightened winter demand. Strong oil demand in Asia and a wide WTI / Brent spread supported long haul crude oil movements from the United States, which was positive for VLCCs. The Suezmax market benefitted from firmer VLCC rates, as well as strong activity in the MED and Black Sea. The after-effects of Hurricane Harvey had a beneficial impact on Atlantic Aframax and LR2 markets, while the Pacific Aframax market benefited from strong regional demand and growing ullage delays. November outlook: We expect to see continued support for the VLCC market in November due to high West to East exports, high refining margins in Asia, and a large spread between WTI and Brent. Instabilities in Northern Iraq and Nigeria could be a negative for the Suezmax market, potentially offset by an increase in weather delays through the Turkish Straits. The end of the hurricane season in the Atlantic, a continued decline in Venezuelan cargos and potential oil supply disruptions in various geopolitical hot spots could impact on Aframax rates through the month. Wild cards: The fragile five oil producers of Iraq, Iran, Nigeria, Libya and Venezuela are all wild cards to watch out for in the upcoming months (see back page), with the potential for oil supply disruptions in various markets. The Atlantic hurricane season is coming to an end, but the onset of winter in the Northern Hemisphere could lead to fresh vessel delays. Oil prices have been very volatile in recent weeks, with Brent crude recently hitting a 28-month high of $64 / bbl; a further increase in prices, potentially spurred by geopolitical events, could lead to higher bunker costs Clean Spot Rates LR2 MR Crude Spot Rates Aframax Suezmax VLCC Source: 90% of Clarksons Source: 90% of Clarksons 2 Tanker rates rebounded strongly in October; Aframax the highest in 9 months

3 Spot Market Review and Outlook Segment Sept 17 Oct17 Spot Rates ($/day) Source: 90% Clarksons October Review November Outlook VLCC 7,400 19,0 Suezmax,800 16,850 VLCC rates rebounded strongly in October as refineries began to increase throughput ahead of the peak winter demand season. Strong Chinese crude imports, with barrels increasingly sourced from the Atlantic basin, further supported VLCC rates during October. Suezmaxes were able to benefit from a stronger VLCC market in October. High levels of Nigerian production (with exports reportedly at a 2-year high) as well as a strong MED / Black Sea market further supported rates. Strong refining margins, SPR builds and line filling at new refineries should keep Chinese crude imports strong through the remainder of the year. We expect long-haul movements from the US to Asia to remain at high levels due to the wide spread between WTI and Brent (~$6-7 / bbl). Instability in northern Iraq could impact on loading volumes from Ceyhan, while renewed militant activity in Nigeria could threaten WAF exports. Offsetting this is the potential for an increase in weather delays through the Turkish Straits as we enter the winter months. Aframax (Pacific),900 12,750 Strong regional demand due to high refining margins supported Pacific Aframax rates, boosted further by an increase in ullage delays. We expect that continued strong Asian oil demand through the winter months will help support Aframax rates in the Pacific. Aframax (Atlantic) 11,150 19,0 The USG / Caribs market strengthened in the first half of October due to adverse weather conditions, which led to vessel delays. An increase in US exports to Europe as well as a strong Black Sea / MED market towards the end of the month was also positive for the Atlantic Aframax market. The USG / Caribs market has fallen significantly since mid-october as weather delays have cleared up, and as Venezuelan cargos continue to dwindle. Iraq uncertainty, as mentioned above, and fresh disruptions at the Sharara oilfield in Libya may put downward pressure on rates in the MED. LR2 11,050 12,600 The LR2 market strengthened slightly in October as the after effects of Hurricane Harvey continued to linger, though rates started to normalize at the end of the month back to pre-harvey levels. We expect rates to continue trending gradually downwards in November, hampered by a weak LR1 market and an increase in oil prices (which makes naphtha less favorable as a feedstock for petrochemical plants in the Far East vs. LPG). 3 Mid-size tanker rates are falling back slightly from October highs

4 Oct-15 Jan-16 Apr-16 Jul-16 Oct-15 Jan-16 Apr-16 Jul-16 Time Charter Market $ 000s/day $ 000s/day Clean 1 Year Time Charter Rates MR LR Crude 1 Year Time Charter Rates Aframax Suezmax VLCC Source: Average of Clarksons, Braemar ACM, and Poten Source: Average of Clarksons, Braemar ACM, and Poten Broker Assessed Time Charter Rates 1 year time charter rates ($/day) 3 year time charter rates ($/day) Sept 17 Oct 17 Sept 17 Oct 17 VLCC 26,000 27,250 28,750 29,000 Suezmax 17,750 17,750 21,250,750 Aframax 14,750 15,250 17,000 17,000 LR2 15,500 14,750 17,250 16,250 MR 13,750 14,000 14,500 14,500 Source: Average of Clarksons, Braemar ACM, and Poten 4 Crude TC rates finding support; LR2 TC rates on the decline

5 Million DWT S&P Market and Fleet Statistics S&P Activity Liquidity in October increased compared to previous months. Prices have found a bottom and in some cases prices are slightly higher than last done (ex. VLCCs). Buyers for older tonnage are trying to bargain hunt but owners are showing resilience to price. The Gener8 Zeus (318k DWT//HHI) was sold to International Seaways for $53M. This was higher than broker estimated values (+5%). On the opposite age spectrum, the Fujikawa (299k DWT/04/Universal) was sold to Dynacom for $27.2M. The price was higher than the sister vessel Isuzugawa which was sold for $25.5M in September. The Suezmax RS Kaystros (158k DWT/17/SWS) was sold to Spyros Polemis for $49.7M which was in line with broker assessed values (adjusting for the Chinese builder discount). The Gener8 Argus (159k DWT/00/HHI) was sold to NG Moundreas for $11M. The vessel was previously committed to Trafigura but subjects were not lifted. NG Moundreas also acquired the Aframax LR Aldebaran (9k DWT/07/Dalian) for $15.9M, which is in line with broker assessed values (adjusting for the Chinese builder discount) Asset Values (USD million) VLCC Suezmax Aframax LR2 MR NB yr yr 15yr (+0.5) Source: Clarksons Note: values in brackets indicates change from last month 34.0 (+1.0) 24.0 (+0.5) 16.3 (+0.3) Total Tanker Fleet Growth Scrapping Deliveries Net Growth (% of Fleet) % 5.7% 3.8% 6.0% 5.1% 8% 3.2% 1.7% 6% 1.7% 3.2% 1.3% 4% 2% 0% -2% -4% Fleet Statistics The tanker fleet has grown by 26.1 mdwt, or 4.7%, since the start of the year. The pace of tanker fleet growth continues to fall, with growth over the past 3 months (3.3 mdwt) the lowest in 2 years. Tanker scrapping has slowed slightly from the highs of Aug / Sept, but remains elevated compared to levels seen in 15 / 16. A total of 8.1 mdwt has been scrapped so far in 17, which is the highest level of scrapping since 13 and far higher than levels seen over the past 2 years (~2.5 mdwt scrapping in 15 / 16). Forecasted Fleet Growth by Size Range VLCC Suezmax Aframax LR2 Panamax MR % 8.2% 2.3% 8.6% 4.3% 3.0% % 3.7% 3.7% 3.5% 3.3% 2.0% 5 Source: Clarksons, internal estimates Source: Clarksons, internal estimates Asset prices have found a bottom; secondhand liquidity is on the rise

6 Change in Demand (mb/d) Economy and Oil Demand Percent Economy Outlook In their newest forecast, the IMF has slightly increased their forecast of global GDP growth in 17 and 18. According to the IMF, The global pickup in activity that started in the second half of 16 gained further momentum in the first half of 17. Growth in China and other parts of emerging Asia remains strong, and the still-difficult conditions faced by several commodity exporters in Latin America, the Commonwealth of Independent States, and sub-saharan Africa show some signs of improvement. USA Europe Japan China IMF expects GDP growth of 2.2% in 17 and 2.3% in 18, due to supportive financial conditions. Recovery is expected to gather strength, with projected growth of 2.1% in 17, before moderating to 1.9% in 18. GDP growth of 1.5% is expected for 17, weakening to 0.7% in 18 on the assumption that fiscal support fades. GDP growth in 17 expected to be higher than 16, and the IMF has raised forecasts for 18 on the assumption that expansionary policies continue (i.e. high public investment). Oil Demand Outlook The average of forecasts continues to show global oil demand growth increasing to ~1.5 mb/d in 18. Brent crude prices have been above $60 / bbl since late- October, the highest price in more than two years. The US EIA expects prices to ease somewhat and average $56 / bbl in 18. But the EIA cautions that price forecasts could be revised in the coming months due to changes in global economic developments, geopolitical events, and crude oil production expectations for the US and other major producers World GDP Growth Average of IMF, OECD, UN, and World Bank Global Oil Demand Growth Average of IEA, EIA, and OPEC 6 Signs of a strengthening global economy and oil demand in 18

7 Geopolitics coming to the fore Mb/d Global oil markets are tightening as high oil demand and OPEC supply cuts have resulted in a drawdown in global oil inventories. This in turn has give support to oil prices, with Brent crude recently hitting a 28-month high of $64 / bbl. OPEC is currently deciding whether to continue supply cuts past the March 18 deadline, but their decision may be clouded by what is going on in some of their member nations, particularly in those nations that have been dubbed the fragile five Oil Outages From The Fragile 5 Supply outages vs. 07 baseline production of 13 mb/d in Iran, Iraq, Venezuela, Nigeria and Libya The fragile five consists of Iran, Iraq, Venezuela, Libya and Nigeria, all of which have geopolitical instabilities that could upset the oil market at any time. In Iran, there is the renewed threat of US sanctions. Iraq is battling instability in the northern regions following the recent vote for Kurdish independence. Venezuela is struggling to maintain oil production, and is also dealing with oil quality issues due to the perilous financial state of PDVSA. Libya continues to deal with internal political struggles. And Nigeria is facing a renewed threat to oil infrastructure from militant groups in the Niger Delta Oil Price ($/bbl) Brent WTI 0.5 Source: IEA The interesting thing about these countries is that, with the exception of Venezuela, all have been producing at the top of their range recently. The maximum crude output from these five countries (in recent history at least) was 13 mb/d in late 07. Since then, supply has been disrupted, for various reasons, by as much as 2.5 mb/d. However, supply in Q3-17 stood at 12.9 mb/d, almost back to 17 levels. Clearly, the risk to oil production in these nations is firmly to the downside, and those risks are rising. Any disruption to oil production is likely to put the oil market balance into further deficit, leading to higher oil prices. In this scenario, does Saudi Arabia let the oil market continue tighten and risk overshooting, or do they step in and add supply? Source: EIA Time will tell as to what steps OPEC will take to keep the oil market in balance. In the meantime, we expect rising volatility due to geopolitics to be a key factor for tankers as we head into the seasonally stronger winter months. 7 Potential supply disruptions could influence OPEC decision making