Kim Ullman has drawn on all his experience to give an upbeat assessment of tanker prospects in his final market outlook report for Concordia Maritime.

The shipping veteran with 40 years in the business is stepping down as chief executive of the Stena-controlled tanker company at the end of the year.

In his last update, he writes that the tanker market remains "surprisingly weak", but a rebound will eventually occur when drawdowns of strategic oil reserves end.

"Rates in the MR segment are around $8,000 per day — double the level earlier this autumn, certainly, but still some way below what an MR vessel requires in order to break even," Ullman said.

The same applies to Concordia's suezmaxes, he argued.

He put the lack of a big boost for the sector down to continued production cuts and stock withdrawals.

Despite a strong recovery in the world economy and oil consumption, total Opec+ production remains at its lowest level in 10 years.

Right map, wrong reality

Fleet utilisation has risen from 75% to 80% as an extra 1.5m barrels per day (bpd) have been pumped since the summer, but Ullman believes the increase has still been too small to have a more material impact on tanker rates.

"We were wrong in our earlier predictions here," he admitted.

"We expected both oil production and freight rates to rise when stock levels were at or below the five-year average. However, this has not been the case.

"The map was right ... but the reality wrong."

Scrapping levels have also disappointed, with older ships employed on sanctioned trades involving Venezuela and Iran.

But Ullman maintains that demand for tankers is highly correlated with actual oil production: "This, in turn, is driven not only by demand for oil, but also by strategic pricing considerations — by a cartel that plays its cards close to its chest."

Consumption should hit 100m bpd this winter, a return to pre-pandemic levels, according to the US Energy Information Administration.

The large imbalance between oil output and consumption — up to 3m bpd — has been filled with stock withdrawals, with the US, China and others drawing down strategic reserves.

"This scenario is not tenable in the long term," Ullman said.

All bad things come to an end

"Withdrawals from both commercial and strategic stocks cannot go on indefinitely — production will have to increase."

Having been in the tanker sector for four decades, Ullman has seen every sharp decline in oil stocks followed by a replenishment, resulting in an upward rebound in freight rates.

"It is my firm belief that this will happen this time too" — it is just a question of to what extent Opec and other major producers can hold their nerve.

At a meeting on Thursday, Opec members decided to stick to production increases of 400,000 bpd, but reserved the right to revisit the decision in an uncertain oil market.

UK shipbroker Howe Robinson Partners said activity in the key cross-Mediterranean MR trades has been better than at the beginning of the week.

Three new cargoes came on to the market in the Black Sea, but varied discharge options have meant limit interest so far, it added.

"So perhaps we could see a slight push up on next-done here," Howe Robinson said.

"A number of ships are delaying due to bad weather. Enquiry levels haven't been there so far to take advantage, but a surge would likely see a sharp increase on rates next week."