For tanker owners, the fourth quarter of 2017 is a disappointing quarter, and 2018 is likely to be a bad year. However, with the arrival of 2018, the future tanker market is likely to reverse the trend faster.
The International Maritime Strategy Agency (MSI) said recently that the data showed that the oil tanker’s overall market changed little in November after the oil tanker’s freight rate rose in October. On a monthly basis, most shipowners’ operating income deteriorated. In the first half of December, there were signs of recovery in some areas, but ship owners were not excited about it.
Contrary to the traditional peak season, the VLCC spot market’s revenue fell sharply in December, and the fourth quarter of 2017 was seen as a weak oil tanker market. The key to the market environment in 2018 is that OPEC has decided to continue to limit production next year.
MSI predicts that the profitability of oil tankers in 2018 will be roughly the same as in 2017. The risk of falling freight rates still exists, but with the arrival of 2018, there are still some positive signs in the tanker market – huge oil demand growth, low fleet capacity growth, large inventories, and US marine oil exports. The strong growth of the refining market and the release of the Chinese refining market are likely to make demand in 2018 better than expected.
Global oil demand increased by 1.8%, while MSI forecast demand growth of 1.4%. In China, there is still considerable uncertainty about import demand, especially considering the leading role of oil inventories, and inventory is rising further. In this case, the increase in strategic oil reserves and the large purchases of independent refineries will also lead to an increase in demand for crude oil imports. According to the assumption of fleet dynamics, the initial impact of the tanker freight market is about a 15% rebound.
The dismantling of old oil tankers will play a key role in the market conditions next year, and the massive dismantling of old oil tankers is expected to have a positive impact on the market. Considering the age distribution of the fleet, the dismantling of the old tankers in 2017 increased. At the same time, it is feasible to dismantle the old oil tankers that need to be dismantled in 2018 and in the next few years.
According to MSI, the tanker dismantling volume increased by about 40% in 2018, affecting all types of tankers. For example, the Aframax tanker, the dismantling amount is 30% higher than the basic situation, and the freight rate of 2019 USD is fully reasonable in 2019, which accelerates the upward trend that began in 2019.