Potential production cuts by Opec next month will not be a showstopper for the recovering tanker market, Frontline says.
Opec members will meet on 5 December with the cartel expected to undo some of its earlier production increase given a drop in the price of a barrel.
Robert Hvide Macleod, chief executive of Frontline Management, says a reduction in production would obviously be negative for freight rates.
“Obviously, the best for the market will be that it doesn't happen. Let's see what the meeting on 5 December concludes, but if it's 0.5 million, I don't think that's going to sort of turn this market in anyway close to where we're coming from,” Macleod said.
“And it might have a small impact and then obviously will be negative. But I don't think it's a huge factor. I think the balance in the tanker market, the fundamentals speak for themselves.
“So, let's see, but I don't think, it's going to be a showstopper,” he said on the tanker owner’s third quarter conference call on Friday.
Macleod also dismissed the suggestion the drop in the oil price would necessarily be bad for tanker owners, despite the resulting drag on equities in the peer group.
He said there is actually a little correlation between oil prices and freight rates.
“Oil volume versus supply of ships is the actual key. In fact, lower crude prices particularly, if caused by excess supply of crude rather than the mentioning demand, can be very healthy for tanker markets.
“Our daily fuel bill is of course lower as well. Low oil prices have also historically help us stimulate demand and demand is ultimately a critical factor in tanker markets.”
The Fredriksen system has been renewing its fleet and has sold a number of older VLCCs, notably those chartered to Frontline by sibling Ship Finance International.
The 305,000-dwt Front Energy and Front Force (built 2004), however, are unlikely to be divested as Macleod says they still have some earning potential.
The tankers are set to be fitted with scrubbers ahead of IMO 2020 emissions rules, he adds.
“It didn't take long to see that the 04s with the high consumption is actually where you are likely to see the quickest payback. So we're going do the upgrade on those two for sure,” Macleod said.
