China's continuing Covid-19 lockdowns are pushing analysts to slash their oil demand forecasts and their expectations for tanker rates.
On Monday, Barry Rogliano Salles’ (BRS Group) said Beijing’s continued insistence on zero Covid-19 would “continue to cast a long shadow over oil and tanker markets” following Rystad Energy projecting a shortfall in oil demand for 2022.
Instead of rising by 600,000 barrels per day this year, BRS Group said Chinese demand would only grow by 400,000 barrels as an estimated 400m people are under some form of movement restriction.
Coupled with the prospect of a refined product export ban, the shipbroker said it expects crude tanker rates to China to jump while Asian MR demand would be hammered.
“Nonetheless, there could still be long haul Chinese diesel exports aboard VLCCs seeing as these complex logistics are normally organised months in advance,” the outfit said in its weekly report.
“According to BRS data, there are 15 VLCCs due to be launched from Asian yards by the end of the second quarter which will make good candidates for such voyages.”
Tanker owners have suggested a rebound in demand following two years of Covid-19 slowdowns would be one of several potential catalysts for tanker markets in 2022.
But Rystad Energy said on Friday that it expected oil demand to lag behind 2019's highs by 1.4m barrels per day, due not only to lockdown in China, but Russia's invasion of Ukraine and high oil prices.
“The global economy is battling surging inflation, additional strict Covid-19 lockdowns in one of the world’s largest economies, and continuing supply chain disruptions, and the impact on oil demand will be significant,” said Rystad vice president of analysis Claudio Galimberti.
“Shrinking demand is a direct result of the impact of lower economic activity globally. Despite continued supply tightness, a demand slump could provide some respite for global prices.”
On Monday, tanker rates continued their slide, but remained above levels seen over the last two years.
The Baltic Dirty Tanker Index fell 83 points to 1,382, marking it’s eighth consecutive day posting a loss.
Average time-charter equivalent (TCE) rates for VLCC rates dropped $80 to -$11,032 per day.
TCE earnings for suezmaxes fell $2,765 to $62,975 per day, while aframaxes cratered $9,259 to $51,435 per day.