Kepler Cheuvreux head of shipping research Petter Haugen is getting bullish on tankers amid talk of a return to $100-a-barrel oil.
Crude oil prices recently climbed to almost $75 per barrel, their highest level in nearly three years, with continued recovery in European and US consumption.
Executives from major traders told the FT Commodities Global Summit that $100 crude is looking likely, due to supply constraints during the energy transition to a low-carbon economy.
The Financial Times reported that Goldman Sachs’ commodities research head is also predicting a new supercycle as government stimulus measures boost demand.
Haugen believes an oil market rally would be driven by strong demand this time and be positive for tankers.
“Normally there is demand destruction when a price [increases] towards new highs and normally such demand destruction should decrease the need of transport of such commodity,” Haugen wrote in a note published on Wednesday.
“But this time is different: high oil prices [are] highly positive for the crude tanker segment as it implies an increase in transport demand and the willingness to pay for such transport.”
He predicted that US producers would increase crude exports during the market rally, boosting tonne-mile demand for tankers in long-haul trade.
“If there is one thing we have learned in the oil market in the past seven years, it is how US supplies are capable to adjust much faster than any other source of supply, with the obvious exception of the deliberate adjustment of supply from Opec,” Haugen said.
“If the US will be the ‘supply-of-last-resort’, those barrels are three times longer away from the marginal demand compared with the ‘conventional’ suppliers.”
Kepler Cheuvreux has forecast spot VLCC earnings to average $23,000 per day. The year-to-date average is $442 per day.
Some analysts took a more cautious stance.
“We share the optimism of the big trading houses that warn of higher oil prices over summer, but further along the oil futures curve, the market tightness may not be sure to stay,” Rystad Energy oil markets analyst Louise Dickson said.
Another shock to the system?
“The oil price could get another shock to the system as the lack of vaccines and spread of mutations in the developing world continues to prevent full recovery of oil demand.”
Recent gains in oil prices have yet to aid tanker owners. Rather, their earnings have been eroded by rising bunker costs.
The price of very low-sulphur fuel oil price has risen to a 14-month high in Singapore. Shipbroker Fearnleys said: “Owners’ bottom lines will remain teetering between red and black.”
Gibson Shipbrokers research head Richard Matthews suggested the supply-demand picture for oil could matter more to tanker owners than crude prices themselves.
“If oil prices reach $100 per barrel because supply has been so heavily constrained, it doesn't support tankers, as no more oil is being shipped and inventories are drawn down in the short term,” he said.
“If prices reach those levels because demand is so strong, then of course tankers benefit.”
