VLCC and suezmax owners will benefit from longhaul shipments from the US in the coming year, even though American shale producers are expected to keep output low in a weak oil price environment, some analysts have predicted.
Alphatanker, AXSMarine’s research unit, said China could hike its imports of US crude to 1m barrels per day (bpd) from 430,000 bpd so far this year due to the US-China trade agreement.
“Considering the relative success of the US’ Phase 1 trade deal with China and our assumption that the incoming Biden administration will not threaten it ... we believe that there could be a further re-orientating of US crude exports towards China,” Alphatanker said in a weekly note.
“Clearly this will have a knock-on impact on tanker markets by supporting VLCC and suezmax demand.”
The US Energy Information Administration (EIA) said Chinese oil demand will rise above the pre-pandemic level this quarter, while the pace of demand recovery in Europe — another important market for US crude — has lagged behind.
“As the travails of the European refining industry continue, we believe that less US crude will be exported to Europe, especially over the first half of [2021],” Alphatanker said. “This will hit Atlantic Basin aframax demand.”
Peter Sand, Bimco’s chief shipping analyst, expects changes in tanker flows due to uneven recovery in oil consumption across the globe.
“It will not be a swift return to business-as-usual, and chartering activity will look quite different to that of pre-pandemic 2019,” he said.
Opec+ vs US producers
In early December, Opec and its Russian-led allies agreed to hike their combined crude production by 500,000 bpd next month and adjust their output monthly from February.
Many analysts believe the carefully crafted strategy will allow Opec+ to keep oil prices below the levels at which most US shale producers can enjoy decent margins.
“We believe that the Opec+ decision signals that next year, the group is willing to accept lower crude prices to secure a greater share of the global oil market,” said Alphatanker, sharing similar sentiments.
“Accordingly, we now project crude prices to remain below levels which would stimulate a strong rebound in price-elastic US light, tight oil supply.”
US crude production will fall from 12.3m bpd in 2019 to 11.3m bpd this year, before a further drop to 11.1m bpd in 2021, according to the EIA’s latest forecast.
With the lack of growth in output, Alphatanker said US crude exports in 2021 are unlikely to rise “much above” the current level of 2.5m bpd to 3m bpd.
