Tanker Market Insight December Research Department, Strategic Development

Transcription

1 Tanker Market Insight December 17 Research Department, Strategic Development

2 Nov-16 Jan-17 Apr-17 Jun-17 Jul-17 Sep-17 Oct-17 Nov-16 Jan-17 Apr-17 Jun-17 Jul-17 Sep-17 Oct-17 $ s / day $ s / day Monthly Summary November review: After a relatively strong October, rates fell across all segments in November. High OPEC compliance and a number of minor production outages resulted in the lowest level of OPEC crude production in 6 months, putting downward pressure on VLCC rates. Suezmax rates softened due to oilfield maintenance in Angola and outages in Nigeria, while WAF exports to Asia fell by 15 kb/d m-o-m (negative for ton-mile demand). A surplus of tonnage and a drop in Libyan exports was negative for the Atlantic Aframax market, though rates in the USG / Caribs region rebounded at the end of the month due to bad weather. LR2 rates fell as product tanker activity was skewed towards the smaller size ranges (MRs and LR1s) vs. long-rage product tankers. December outlook: We expect rates to find some relief in December as winter seasonality and weather delays are typically positive for rates in all segments. An increase in crude selling prices by Iraq and Saudi Arabia may push Asian and European buyers to turn to the United States for supply, which would add to VLCC ton mile demand. Higher volumes in the Black Sea / MED due to an increase in Kashagan cargos may also be positive for Suezmax rates. We anticipate that LR2 rates will remain flat as the West-to-East Naphtha arbitrage remains closed. Wild cards: December is typically a volatile month for rates due to shorter daylight hours, weather delays, and a short fixing month due to the holidays. Geopolitical hot spots, particularly Venezuela, may also be a wild card with regards to oil production / export disruptions. US imports of Venezuelan crude dropped ~33% in November, and President Maduro is threatening to cut crude exports to the US in response to sanctions Clean Spot Rates LR2 MR Crude Spot Rates Aframax Suezmax VLCC 5 Source: 9% of Clarksons Source: 9% of Clarksons 2 A disappointing month in November as rates gave back October gains

3 Spot Market Review and Outlook Segment Oct 17 Nov 17 Spot Rates ($/day) Source: 9% Clarksons November Review December Outlook VLCC 19, 16,8 Suezmax 16,85 15, VLCC rates declined over the course of the month to the lowest since mid-september as OPEC production fell to a 6 month low, and as a drawdown in Chinese crude inventories led to reduced Asian import demand. Lower exports from WAF due to maintenance in Angola and outages in Nigeria put pressure on Suezmax rates. In addition, a reduction in WAF exports to Asia by 15 kb/d due to an unfavourable arbitrage led to lower Suezmax ton mile demand. Iraq and Saudi Arabia have raised the selling price for Asian and European buyers in December which may make them look to the US for supply, adding to VLCC ton mile demand. Record high CPC loadings at Novorossiysk in December due to higher Kashagan volumes should be positive for Suezmax demand in the Black Sea / MED. Winter weather could cause an increase in vessel delays through the Turkish Straits that may further support rates. Aframax (Pacific) 12,75,6 A weaker VLCC market impacted Pacific Aframax rates in November. Clearing ullage delays in Singapore and China and no significant weather delays also put negative pressure on rates. We expect the market to remain relatively flat; however a pick up in the Atlantic Aframax market, or an increase in regional weather delays could cause rates to rise later in December. Aframax (Atlantic) 19,, A strong Black Sea / MED market in October gave way to a weaker November due to a surplus of tonnage in the region and a slight reduction in Libyan crude exports. An increase in fog related delays in the US Gulf led to an increase in USG / Caribs rates towards the end of the month. Continued weather delays on both sides of the Atlantic (fog in the US Gulf and weather delays through the Turkish Straits) coupled with strong European refining margins (highest in four months) should give support to Atlantic Aframax rates during the course of the month. LR2 12,6 11,4 There was a pick up in product tanker activity in November; however, demand was skewed toward short haul cargoes which favoured MRs and LR1s over long range product tankers. The naphtha arb from West to East remains closed, as is the jet fuel arb from the Far East to the US. We therefore expect rates to stay under pressure in the near-term. 3 Rates expected to trend upwards in Dec 17 on seasonality / weather

4 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 Time Charter Market $ s/day $ s/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) Oct 17 Nov 17 Oct 17 Nov 17 VLCC 27,25 28, 29, 29, Suezmax 17,75 17,75,75,75 Aframax 15,25 15,5 17, 17, LR2 14,75 14,75 16,25 16,5 MR 14, 14,25 14,5 14,75 Source: Average of Clarksons, Braemar ACM, and Poten 4 Slight uptick in TC rates as we enter the seasonally stronger winter months

5 Million DWT S&P Market and Fleet Statistics S&P Activity Ridgebury has acquired 4x older VLCCs: 3x from DHT (1x 2, and 2x 1), and 1x 1 from Euronav. Pricing achieved on the vessels was about % higher than last done. The vessels will be used for onward trading. The strategy is to capture the volatility of the VLCC market as the tanker market improves and scrap the vessels as the exit mechanism, limiting the downside risk in asset values. The VLCC Meandros (/HHI) has been sold for $19.4M. Buyers are unknown at this point. The Suezmax Teide Spirit (4/DSME), which was on a bareboat to TGP, was sold to Euronav for $18.8M. The price sets a new benchmark since there has been limited sales of this vintage, and was higher than broker expectations. The Aframax Singapore Voyage (3/Namura) was sold for $.4M. The price is about 5% higher than last done sister vessel, the ex-steller Voyager, which was sold in Sept-17. Liquidity improved in November, and prices have come off the bottom by about 5% for both modern and older tonnage. NB 81. 5yr Asset Values (USD million) VLCC Suezmax Aframax LR2 MR yr yr (+.5) 55.5 (+1.5) (+3.) (+1.) (+1.) 45.5 (-1.) Source: Clarksons Note: values in brackets indicates change from last month (-2.) 18. (-2.) Total Tanker Fleet Growth Scrapping Deliveries Net Growth (% of Fleet) % 5.8% 3.8% 6.% 5.% 3.3% 8% 6% 1.7% 3.2% 1.5% 1.3% 4% 2% % -2% -4% Fleet Statistics The tanker fleet has grown by 27. mdwt, or 4.9%, since the start of the year. Very few new tankers are expected to deliver in Dec 17, meaning total fleet growth for 17 should be ~5% (down from 6% fleet growth last year). Tanker deliveries are expected to fall to ~31 mdwt in 18 from ~37 mdwt this year while scrapping is expected to increase slightly to ~11.5 mdwt from ~9.5 mdwt this year. As such, we expect that tanker fleet growth will fall to ~3.3% in 18. Forecasted Fleet Growth by Size Range VLCC Suezmax Aframax LR2 Panamax MR % 7.8% 1.1% 8.5% 3.6% 3.2% % 3.4% 3.8% 2.1% 3.8% 2.% 5 Source: Clarksons, internal estimates Source: Clarksons, internal estimates Secondhand liquidity continues to improve; prices off the bottom by ~5%

6 Change in Demand (mb/d) Economy and Oil Demand Percent Economy Outlook There have been no updates to global economic forecasts since last month. According to the World Bank s monthly report, global growth remained solid in Q3-17 and incoming data suggests continued strength in Q4-17. Growth accelerated in the US, remained strong in Europe, and slowed only marginally in China. The ongoing recovery in advanced and developing economies is providing a boost to global trade USA Europe Japan Growth in Q3 increased to 3.3% quarter-over-quarter (q/q), from an already strong 3.1% in Q2. Growth remained strong in Q3, at 2.4% (q/q), and data suggests a continued recovery in Q4. The Manufacturing PMI increased to its highest level since April. Q3 growth slowed to 1.4% (q/q) after 2.6% growth in Q2. Nevertheless, this marked the 7 th consecutive quarter of growth the longest streak since World GDP Growth Average of IMF, OECD, UN, and World Bank China Growth softened slightly to 6.8% in Q3 (year-over-year) and data suggests a continued slowing in Q4. Oil Demand Outlook The IEA has revised down their oil demand growth forecast for 17 and 18 by.1 mb/d due to the impact of higher oil prices and a mild start to winter in the northern hemisphere. However, the average of agency forecasts still suggests global oil demand growth of 1.5 mb/d in 18. Brent crude prices have remained above $6 / bbl since late- October. The US EIA continues to expect prices to ease somewhat and average $56 / bbl in 18 due to their expectation that global oil supply growth will slightly outpace global demand growth in Global Oil Demand Growth Average of IEA, EIA, and OPEC 6 Global economic growth continues to increase in-line with forecasts

7 17 Tanker Market Review USD / day What s Christmas time to you but a time for paying bills without money; a time for finding yourself a year older, but not an hour richer; a time for balancing your books and having every item in em through a round dozen of months presented dead against you? Charles Dickens, A Christmas Carol The ghost of Christmas past The tanker market began 17 in relatively positive fashion; rates last December averaged around $, / day for Suezmaxes and around $25, / day for Aframaxes as OPEC squeezed out as much crude as it could ahead of supply cuts, and some of this strength carried over into Q1-17. However, rates quickly turned in Feb / Mar 17, and after a slight rally in Q2 began a long, slow decline to multi-year lows during the third quarter. The ghost of Christmas present The two drivers of this steep decline in rates during 17 have been high fleet growth, and OPEC supply cuts. Tanker fleet growth is coming in around 5% this year, which is in line with projections at the start of the year, but OPEC supply cuts have been more impactful than initially forecast. 17 Tanker Scorecard yr avg Aframax Spot ($ / day)* 12,617,7 21,765 Suezmax Spot ($ / day)* 14,214 24,87 29,116 Tanker Deliveries (mdwt) Tanker Scrapping (mdwt) Tanker Fleet Growth (mdwt) Tanker Fleet Growth (%) 5.% 6.% 4.4% New Tanker Orders (mdwt) *9% of Clarksons global average Mid-Size Spot Rates (Last 12 Months) Suezmax Aframax The problem with OPEC cuts for mid-size tankers is two-fold; firstly, it means fewer cargos from load regions that are typically far away from key discharge areas, hence there is a detrimental affect on overall tonne-mile demand. Secondly, a large drop in Middle East cargos has forced more VLCCs into the Atlantic basin, where they compete with Suezmaxes. This has pushed down rates across the crude tanker space. The ghost of Christmas yet to come Looking ahead to 18, we believe that better times are ahead for the tanker market, though some challenges still need to be overcome before we will see meaningfully better rates. Fleet growth is set to fall to ~3-4% next year and to ~2% in 19. Meanwhile, OPEC supply cuts may start to reverse in 2H-18 (despite OPEC s recent announcement that cuts will be extended to end-18) as global oil inventories trend down towards 5-year average levels and as oil prices find support. This should help tanker fleet utilization, and therefore rates, as we move into the latter half of 18. With any luck, by next Christmas the tanker market will once again have reason to find cheer! 7 Bah humbug; Hard Times for the tanker market, but Great Expectations for 18