Gibson Shipbrokers has pinpointed South America as a potential bright spot for a beleaguered tanker sector.
A combination of increasing crude production in Brazil and Guyana and a lack of refinery expansion means more barrels for export, the UK broker believes.
"Latin America has historically been home to both a large population and large refining base. However, decades of underinvestment and economic turmoil, coupled with overseas competition has seen regional players struggle to service domestic demand," the UK shop said.
Gibson added that recent efforts to boost the continent's refining capacity have failed, with the bankrupt Limetree Bay plant in St Croix being auctioned off in November.
Brazilian major Petrobras has also sought to divest some refining assets.
Gibson identifies only one credible refining project still underway, with Mexico's Pemex developing a greenfield project in Dos Bocas.
"The lack of refining capacity expansion in the region is a double positive for tankers," the broker said.
"Crude production in Brazil and Guyana is expanding, but with no increases in domestic crude processing capacity, any increase in production will have to be exported," the company added.
Mexican cloud on the horizon
Gibson sees Brazilian and Guyanese crude output growing by 1.8m bpd over the next five years, most of which will be shipped out on tankers.
In fact, the broker argues the Dos Bocas development is the only cloud on the horizon.
The 340,000 barrel-per-day refinery is due to launch in 2023, and will reduce product imports from the US Gulf significantly from 470,000 bpd.
"This will cut off much of the trade going into Mexico's East coast; however, given the short-haul nature, this is the least worst outcome for regional tanker trade, with longer-haul exports down to South America and the west coast remaining relatively unscathed," said Gibson.
Questions marks in Brazil
In Brazil, Petrobras has allocated $1bn to finish a 145,000-bpd expansion at the Abreu e Lima Refinery (RNEST), but this will not come online until at least 2027, if it is completed at all, the broker added.
Venezuela, however, remains a key uncertainty in the long term.
If US sanctions are lifted, then crude and product exports across the region will see an upside, Gibson believes.
"However, even once eased, the lasting impact of crippling sanctions on export and refining facilities may prevent Venezuela from ever fully reaching its potential, with any increase in clean product production likely to remain within the country, ensuring the US remains Latin America's main source of refined product supply for the foreseeable future," the company said.
But the benefit for product tankers overall will be modest, Gibson believes, due to "sluggish" demand projections in the region.
This is forecast to expand by a "tiny" 300,000 bpd between 2019 and 2026, which is essentially offset by the new Dos Bocas refinery.
