In Hellenic Shipping News 21/03/2017
The growth prospects of the product tanker market have been in debate over the past few months, after the subdued performance of the clean tanker segment during 2016. As such, the latest IEA medium term oil market report, which was released earlier this months could provide cause for at least some degree of optimism. Shipbroker Gibson noted in its latest weekly report that “most relevant to the product tanker market, was the IEA’s analysis of product balances, broken down into light (gasoline/naphtha), middle (gasoil/kerosene) and heavy distillates (fuel oil). Interestingly, product balances in Europe are expected to see little change between 2016 and 2022. Europe will remain short on middle distillates, and long on lighter distillates. This signals limited prospects for European imports generating increased tonne mile demand, given the product is likely to remain primarily supplied by the US, Former Soviet Union (FSU) and Middle East/India. The good news for Europe is that there are sufficient outlets for its surplus light ends. The US will have a shortage of about 0.5 million b/d of gasoline, similar to the current picture, whilst other regions such as Africa and Latin America post small deficits for the lighter ends. Evidently there is a reasonable selection of export destinations within the Atlantic for European gasoline”.
According to the London-based shipbroker, “on the subject of Africa, closer analysis of the IEA’s report reveals some background behind the data. The IEA suggests that Africa’s shortage of lighter distillates will be the same in 2022 as it is today, which is surprising considering demand growth in the region. However, there is a significant assumption: the Lekki refinery in Nigeria, which is slated for start up sometime next year. However, the IEA are cautious, and do not factor this refinery as impacting the market until 2022. On the face of it, no change in African import demand is bearish for product tankers, however as this key refinery is not expected until 2022, we can expect African import demand to continue rising until the refinery is brought online. Furthermore, given the track record of refining in Nigeria, one must be cautious as to whether this plant can (a) be built within the next 5 years, and (b) run consistently near design capacity. Any setbacks here will provide upside support for the tanker markets. In terms of middle distillates, Africa and Latin America will see their import requirements shrink marginally to a combined 1.5 million b/d with the primary sources of supply likely to be the US, Middle East (inc. India) and Russia”.
Gibson added that “globally, the Middle East will continue to be the primary source of export growth over the forecast period. The regions surplus of gasoil will grow by approximately 70% over the next five years, whilst the light distillates surplus will post growth of 85% over the same period. All of this bodes well for exports from the region. In Asia, 2016 saw a gasoil surplus, forcing traders to push export barrels long haul, primarily driven by the emergence of the teapot refiners in China. However, by 2022, this surplus will flip to a deficit. In one sense, this is bearish as outbound product flows fall away. However, increased import demand will partially offset these declines. Additionally, Asia’s shortage of gasoline/naphtha will grow by over 0.5 million b/d by 2022. Whilst this growth is positive, it does mark a significant downwards revision from the IEA’s 2016 report which projected light distillates import growth of 1.6 million b/d by 2021. Despite this downwards revision, Asia’s growing product deficits will support long haul imports from both the Middle East and Atlantic basin, generating incremental tonne mile demand, in spite of declining exports from the region”, it concluded.
Meanwhile, in the crude tanker markets this week, in the Middle East, Gibson noted that “March VLCC fixing closed out and Charterers took an easy start to the new April programme. Overall, volumes were reasonable, but the weight of availability limited rates to within their previous flat range. Lows slid into the high ws 40’s to the East with little better than ws 55 for more restricted runs and rates to the West down to ws 27 via Cape. Busy, perhaps, next week, but Owners will find little leverage. Suezmaxes started in reasonable form, but enquiry thinned as the week progressed and rates slid off to 87.5 to the East and ws 42.5 to the West with little early change likely. Aframaxes pushed on as supportive inter Far East action escalated. Rates moved to 80,000 by ws 130 to Singapore and could even add to that next week”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
