Against a backdrop of falling oil prices, which is boosting demand, the movement of clean tanker rates aligning with tonne-mile demand suggest that the supply of vessels in certain load regions is tight and will therefore prove bullish for the tanker trade.
Falling oil prices are spurring demand for oil and the short supply of vessels in certain load regions should boost the clean tanker trade in the winter months
EARNINGS for medium range two tankers have been stronger heading into the seasonally sensitive rate window this autumn.
Returns are correlating more closely with daily shifts in tonne-mile demand, which can be seen in the chart below.
This is a bullish sign for clean tanker owners.
The movement of rates aligning with tonne-mile demand suggests that the supply of vessels in certain load regions is lower. Indeed, shifting trade patterns appear to be causing this rate strength — particularly bottlenecks in Europe.
The low water levels on the Rhine are creating a disruption in the Amsterdam-Rotterdam-Antwerp product hub, which is creating interesting opportunities for diesel and gasoil shipments to other regions.
Tonne-mile demand created by European clean product imports fell noticeably into September and rebounded somewhat in October.
However, a look at regional imports shows that movements into northwest Europe are still low.
This has had the effect of reducing tonnage supply in the region and supporting the TC2 Europe to US benchmark rates.
Many owners reported weaker earnings in their third-quarter reports and have expressed optimism about the fourth quarter. Individual market performance will be dependent on the location of that controller’s ships, but the trend for the rest of the winter looks optimistic.
Oil prices are currently falling, which suggests more robust demand in the months ahead.
Additionally, the lower prices should start translating into cheaper bunker costs, and in turn firmer time charter equivalent returns.
The oversupply of ships remains a concern, but for now rising tonne-mile demand, changing arbitrage opportunities, and regional tonnage balances will continue to support rates.