Tanker owners could potentially be banking record earnings this winter as demand fundamentals support a growing recovery.

That is the view of Norwegian investment bank Cleaves Securities, which has come out with some eye-catching predictions in its latest sector-wide report.

Head of research Peter Michael Christensen believes recent strength in clean and dirty vessel markets is “a tonne-mile story”, with Russian sanctions the catalyst.

He pointed to “highly inefficient” trade routes boosting ship use so far this year.

If Europe succeeds in banning Russian oil by the start of 2023, Russia would need to find buyers for another 1m barrels per day of products and 1.3m bpd of crude, while Europe would need to source imports from elsewhere, increasing journey lengths, the analyst explains.

The change in Russian flows away from Europe has already increased demand by 184 MR tanker equivalents, Christensen said.

And he forecasts that the European Union ban could more than treble that figure in the short term.

“With fleet utilisation already above 90%, a 3% to 4% increase ... could see several vessel classes hit record earnings this winter,” Christensen said.

On the dirty side, the US has 434m barrels in its Strategic Petroleum Reserve (SPR) — the lowest level since 1984.

Cleaves argues that restocking this reservoir could tie up 24 VLCCs from the Middle East for a year.

Production increase

Christensen also referred to a US Energy Information Agency (IEA) forecast of a 17% increase in energy consumption throughout this decade.

Cleaves is tipping most of the resulting increase in oil product output to take place in the Middle East and US, which is supportive of tankers.

The newbuilding orderbook at 5% of the existing fleet is the lowest since Cleaves’ records began in 1996.

Christensen also believes more scrapping is expected as the fleet ages, arguing that this could result in negative fleet growth in 2024.

“We are very optimistic towards the oil tanker sector going forward,” the analyst said.

Cleaves sees fleet use staying above 90% for the next few years, with a cyclical peak being reached in 2024.

The investment bank’s tanker share index has more than doubled in four months.

But the company still sees “significant” upside for stocks and has a “buy” rating on the sector.