Tanker Shipping


Winter all year long seems to be what is needed to balance the tanker market in 2010

Winter all year long seems to be what is needed to balance the tanker market in 2010.


World oil demand declined in 2009 for the second consecutive year. In 2008, oil demand declined by 0.3 mb/d and in 2009 demand declined by 1.3 mb/d according to International Energy Agency (IEA).

IEA expects oil demand to increase by 1.4 million barrels per day (mb/d) while EIA (US Department of Energy) expects demand growth of 1.1 mb/d and OPEC being equally non-bullish expecting a growth of just 1.1 mb/d.

A cold snap across the globe, along with increasing seasonal demand and product stock draws, has underpinned product market sentiment and lifted crack spreads and refining margins, especially in the US and Europe. Should the cold weather persist, the overhang of middle distillate barrels would be partly mitigated, providing some relief to refiners in the coming weeks. However, the sustainability of recent developments in product markets and the positive impact on crude fundamentals and prices will largely depend on economic growth in the future.

Floating oil stocks have reached a considerable level and speculative traders with cash in large surplus have invested heavily in both crude oil and refined products. Widespread oil stocks in permanent and temporary floating storages will definitely affect the tanker market in 2010.


Clean product tanker rates are riding piggy-back on the cold weather conditions across the board in the northern hemisphere. Snow storms in the US, across Europe and all the way to China have reignited the demand for heating oil, gasoil and gasoline and lifted rates threefold for product tanker transports from below OPEX-levels to USD 15-20,000 per day. Back in November these vessels were doing business for less than USD 4,000 per day, resulting in a loss on almost every trip.

Time charterers are still reluctant to do much business, despite the sudden peak in spot rates. During 2009, only 14 Clean Handysize tankers were taken on time charter as compared to 50 fixtures in 2008. The trend of very few time charter fixtures could continue in 2010 as charterers will favour the spot market as tonnage is abundant.


Multiple factors were behind the recent impressive and rapid spike in spot freight rates for larger crude carriers. Generally, trading conditions in the VLCC market improved during the 4th quarter of 2009, with rates going from USD 20,000 per day at the beginning of September to USD 100,000 per day by mid-January. The balance between tanker supply and demand gradually became tighter, not least supported by ongoing floating storage. As a result, only a minor extra push was needed to transform “just enough” tonnage supply into “extremely limited availability” in January. Such a push was offered by high levels of chartering activity out of West Africa and the Middle East Gulf as well as further weather related delays across the Northern Hemisphere. This resulted in rapidly diminishing spot tonnage availability, with spot tanker supply in West Africa becoming particularly tight. Suezmax tankers in West Africa also saw more opportunities, as charterers had to split cargoes into smaller parcels due to the lack of VLCCs in the region.


The overall tanker fleet grew by 7.4% in 2009, caused by deliveries of 48.3 million DWT offset by tonnage removed for conversions amounting to 10 million DWT and 8.4 million DWT being demolished. Delivery of the order book was 25% behind schedule in 2009. 64.3 million DWT should have been delivered.

The large crude tanker segments, VLCC, Suezmax and Aframax saw fleet capacity increase by an almost controllable 7% in 2009, but 2010 supply outlook looks a bit more challenging. Gross supply of 13% equal to 40.6 million DWT is going to be offset by the phase-out and other removals from the fleet. With 3 million DWT of tanker tonnage currently undergoing conversion into bulkers and FPSO’s demolition simply must pick up. The required tonnage to be demolished, in order to keep the tanker fleet growing by 7% in 2010, is a doubling of 2009-demolitions, equal to 17.6 million DWT.

Considerable product tanker tonnage surplus in a falling market resulted most of the year in extremely low freight rates. The product tanker fleet (10,000+ DWT) grew by 10% in 2009 adding to the supply overhang from 2008 where the fleet grew by 11%. In 2010 the fleet is set to grow by 9.7-12.1% depending on the quantity of ships being demolished. The scrapping potential in this segment consists of 2.4 million DWT being 30 years or above.


The main part of demand growth is expected to come from developing economies in Asia, while demand from OECD is expected by IEA to remain unchanged at 2009 demand level.

Floating and permanent storage is foreseen to play a role throughout 2010. This will inevitably depress tanker demand more than a situation with more “normal” stock levels, in particular with oil demand being quite fragile and much depending on the recovery of the world economy. Current estimates point to 50 million barrels of crude oil and 50 million barrels of clean products on floating storage, which reduces the tonnage supply at the benefit of rates.

The excess supply, which haunted the market in 2009, is expected to continue in 2010 for both crude and product tankers. The capacity glut is simply too significant to expect much more.

Freight rates for crude carriers are forecast by MSI to slide downwards from current levels over the next 6 months where VLCC and Suezmax are forecast to hit rates around USD 22,000 per day, with Aframax going down to USD 14,000 per day. Product tanker rates are foreseen to return to depressed levels below USD 10,000 per day during first half of 2010.

Current News:

The oil price has been quite volatile during winter season. Going from USD 73 per barrel in mid-December the price spiked 3 weeks later at USD 82 per barrel the highest price since the 4th quarter of 2008. The rest of January saw the price slide again, but forecasts point towards another hike, at an oil price of USD 90 per barrel by the end of 2010.

in Copenhagen, DK


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