Heading into 2021, the story for tankers was simple and straightforward. As vaccination against Covid-19 became widespread and the pandemic that forced the world into lockdown subsided, travel was due to pick up and boost oil demand, lifting a market that cratered in the summer of 2020.

The reality was a bit different. Rates improved as 2021 wore on but not enough to see tankers come roaring back and the emergence of the Omicron variant of Covid-19, among other issues, complicated matters further.

So as we head into 2022, is the recovery story back on track or still on hold?

According to Jefferies analyst Randy Giveans, this will depend on how strongly oil demand recovers and how well the market can absorb new tonnage.

"We definitely see a better rate environment in 2022 but, to be frank, that's easy to say because 2021 was the worst year in decades," Giveans said. "It's not like, 'Oh, this is such a big call'."

The Baltic Dirty Tanker Index spent much of 2021 in the 500s and 600s, occasionally peaking above 700. Its performance was far below the sanctions-fuelled rally in the autumn of 2019, the oil price war in the spring of 2020 and well below previous years.

On the products side, the Baltic Clean Tanker Index similarly spent the year in the doldrums, seldom breaking the 600 barrier and spending much of the summer and early autumn in the 400s.

Jefferies analyst Randy Giveans is confident about tankers in 2022. Photo: Johnathon Henninger/TradeWinds Events

However, both indexes ticked up in the closing weeks of the year.

Product tankers saw rates rise in mid-October, with the Baltic Clean Tanker Index jumping from 473 to a calendar-year high of 856 on 15 December before cooling off.

The Baltic Dirty Tanker Index saw its rise start in late September, hitting 835 on 11 November and peaking over 800 again in late December.

Giveans' optimism stems from the expectation that demand for oil will improve in the coming year with a boost from dwindling inventory levels that will force importing countries to bring in more oil and replace what they have drawn down.

He said scrapping could be a boost, too.

"I think the recovery, the outlook, is still intact just from a purely supply/demand perspective," he said. "It's very hard to imagine a scenario where 2022 demand for oil and also products ... is below 2021 levels."

Gibsons Shipbrokers research director Richard Matthews pointed out a handful of potential risks for the year ahead.

While many tanker owners have trumpeted an ageing fleet and a small orderbook as reason for optimism, Matthews said there was a glut of deliveries on the way.

That builds on 2021, which saw more deliveries than expected and less scrapping, despite high steel prices and a weak market.

"Combined, we have nearly 100 VLCCs/suezmaxes set to join the fleet — the highest number since 2017," he said.

Richard Matthews is the head of research at Gibson Shipbrokers. Photo: Susanne Hakuba

"These vessels will compete in the CPP [clean petroleum products] market on their maiden voyages, putting downwards pressure on clean tankers, as well as crude carriers."

He said geopolitical issues also loom, with tensions rising between Russia and Ukraine, and Iran and Venezuela seeking sanctions relief.

"Elections in Libya have been postponed and even when held the outcome could be disputed and may see crude production disrupted," Matthews added.

On the timing of a recovery, Giveans was non-committal on a date but said the gains would come in dribs and drabs.

"I think there's going to be some seasonal aspects, some demand spikes," he said. "It’s going to be a surge up 20%, then maybe down 10%, then maybe up 5%, down 5%.

"It's going to be spotty. I do expect a more sequential grind higher."

Matthews was more cautious.

He pointed to newbuilding deliveries, which he said would shrink substantially from the 2022 mark in the coming years, making the picture for 2023 and 2024 "very bullish" alongside the inevitable scrapping.

He expects an inflexion point to come in mid-2023 or even 2024 "subject to Covid being fully behind us".