VLCC owners are next in line for a spike in rates spurred by rising US exports, DNB Markets says.
Analysts led by Nicolay Dyvik believe the crude market will benefit in 2019 and 2020 from the same trend which drove a surge in VLGC rates in 2014 and 2015 and is now a key catalyst for today’s rising tide in LNG.
“Similar to LPG and LNG, crude tankers are seeing a shift in exports from the Middle East to the US,” DNB Markets said in a tanker update.
Dyvik explains the US exported 2.6 million barrels per day of crude last week, up from 0.5 million barrels per day in 2016.
At the same time the average sailing distance has climbed from 1,900 nautical miles in the first three months of 2016 to 8,500 nautical miles today.
This is set to rise further to 9,700 nautical miles in 2020, the analysts say.
“The US export distance is now a round 75% longer than for the Middle East,” the analysts said.
“The cost of freight for a VLCC over the value of cargo is around 1.5%; hence rates could easily double on a sudden move in oil prices.”
