VLCC owners look set to enjoy many more trips on the sector’s longest route as the oil demand picture strengthens.
The latest International Energy Agency report forecasts a strong recovery in China and projects record global oil demand of 103.5m barrels per day (bpd) in the fourth quarter of 2023, compared to 100m bpd in the first three months.
“This suggests a positive trend for the latter half of the year. As a result, if US crude prices remain competitive, exports will likely continue, which bodes well for rates given that the US-China route is the world’s longest,” Clarksons Securities analysts Frode Morkedal and Even Kolsgaard said.
Fearnley Securities said this level of demand is highly bullish for tanker markets.
But the caveat is that oil prices would likely add to current macroeconomic pressures and could lead to demand destruction, it warned.
Fearnley analysts said observed demand in Europe and the Americas is down 1m bpd each so far this year.
This implies a hefty recovery at some point in 2023, the investment bank argues.
VLCC rates have stabilised at around $98,000 per day following last week’s surge past $100,000, as charter activity slows down.
Despite a recent decline in Brent oil prices, refinery margins continue to be healthy, suggesting that there has been no significant change in refinery demand for crude oil, Clarksons Securities said.
Busy in the Middle East
The Middle East Gulf has seen substantial vessel booking activity, while the US Gulf market is gradually gaining strength, brokers report.
Reuters has reported that US crude exports to China in March are set to reach a two-and-a-half-year high, driven by rebounding demand and competitive pricing compared to Middle East supplies.
“This trend is already evident in the VLCC market, with current activity focused on loadings scheduled for mid-April,” they said.