Frontline forecasts the re-entry of Libya into oil markets boosting suezmax business as it said oil demand could be firmer than expected.

Interim chief executive Lars Barstad told analysts that the fourth-quarter tanker markets remained potentially volatile and are dependent on increased demand as the shielding effect of storage wound down.

“Demand for tankers is still capped by the Opec caps, but we find it extremely encouraging to see oil prices perform strongly as the volumes offered increase significantly, particularly by the Libyan exports that resumed in October,” he said.

“In isolation, this suggests oil demand might actually be firmer than the market in general expects.”

Buthe cautioned that it was still early to call.

Accelerating inventory draw, of 3m barrels per day (bpd) to 4m bpd today, could push the oil market back into balance earlier than many predict, he said.

Barstad said the unwinding floating storage contango has seen levels of oil stored falling at least 40% from a peak of about 100m barrels to 60m barrels now, but there is still a record amount of sanctioned crude that requires storage.

Libya has ramped up production by about 1.2m bpd, he said.

“This has made it far more interesting to be a suezmax charterer than it has been for the last couple of months,” Barstad said.

“We see a lot more barrels appearing in the market, and a lot of these barrels have ... for a while now been going east, and that is a perfect fit for the suezmax vessels. So it has supported the market in the Mediterranean significantly.”

However, he said payment of a dividend by Frontline or the acquisition of assets or companies were unlikely in the fourth quarter due to market uncertainties.

Frontline did not pay a dividend for the third quarter despite making a net profit of $57.1m, compared with a loss of $9.9m in the same period last year.

The company had earlier predicted that VLCC spot rates would fall to $22,600 per day in the final quarter from $49,200 per day in the third quarter.

Suezmaxes are expected to achieve $12,600 per day, down from $25,100 per day, and LR2s should rise to $13,800 per day, from $12,800 per day.

Frontline has eight LR2s operating in crude trades and 10 in clean markets, with the dirty vessels coming under pressure from a reduction in Russian output.