Many tanker players have described the 2020 tanker market as a tale of two halves – and a leading tanker brokerage predicts this year to be more of the same, just in a reverse way.
Spot tanker earnings reached their all-time highs in the first half of last year before a spectacular collapse across the segments, and shipowners are facing the worst summer in decades.
In a research note, Gibson Shipbrokers said tanker markets could recover throughout 2021 as Covid-19 vaccines are rolled out across the globe.
“Although the same degree of volatility is not expected this year, it is shaping up to be a year of two halves,” the London-based brokerage said.
With a bearish oil demand picture amid renewed waves of coronavirus infections, Saudi Arabia announced a surprise crude production cut of 1m barrels per day in February and March.
Gibson said the reduction could accelerate inventory destocking from floating storage, releasing tonnage into an already oversupplied market.
“The short-term signals are undoubtedly bearish,” the brokerage said. “Restrictive lockdown measures remain a necessary containment measure for much of the world which will continue to limit the recovery in fuel demand for at least the first quarter.”
Signs of recovery expected
But Gibson expects “green shoots of recovery” to be seen by April with mass vaccination programmes in Europe and the US.
“It will take time, but…governments around the world will have more flexibility to avoid oppressive lockdown measures,” the note said.
“Cautious optimism should be the key phrase going forwards with vaccines, fiscal stimulus, and a gradual return to the new normal.”
For a strong recovery to materialise by the end of 2021, the brokerage said scrapping needs to increase to balance newbuilding deliveries and vaccines have to be effective and widespread before winter, though.
Waiting for demolition
Clarksons Research data showed 3.09m dwt of tankers were scrapped in 2020, the lowest since 2016.
With weak earnings amid tonnage oversupply and an aging fleet, Braemar ACM analyst Anoop Singh expects more scrapping in the near future.
“The rush for the scrapyards has yet to start, perhaps with owners holding out for a year-end upside or finding employment on sanctioned trades,” Singh said.
“We do think a wave of removals is coming, even if timing its start accurately remains difficult.”
Challenging year
Simpson Spence Young consultant Claire Grierson said this year is set to be “challenging” for tanker markets, highlighting the uncertainty from a new US administration.
President-elect Joe Biden supports a revival of the Iran nuclear deal, which would pave the way for the US to relax sanctions on the Iranian oil and shipping sectors.
“Refiners have replaced lost Iranian crude with predominantly other Middle East Gulf crudes and Russian Urals. Opec+ would have to adapt its supply quotas to accommodate more Iranian oil,” Grierson wrote in the brokerage’s annual outlook.
“One of the main downsides for the crude tanker market would be the return of Iran’s tanker fleet.
“These ships have largely been utilised for storing oil since sanctions were imposed and if these vessels start delivering Iranian oil to refiners again, it will take trade away from the rest of the fleet.
