prospects! VLCC Market Remains Strong Momentum
the end of the year, the VLCC market remained strong and is expected to continue into 2023. Shipbroker Gibson said that next year's OPEC + regional refineries are scheduled to increase production, and from a fundamental point of view, freight revenue growth will slow in 2023, but changing trade flows and fleet capacity changes will complicate the situation.
on the supply side, Gibson's data shows that there are currently 876 VLCCs, but the actual number of vessels operating on major routes, non-sanctioned markets, is lower, with 15 per cent of vessels engaged in sanctions-related or non-conventional trade. In addition, 15% of the ships are more than 15 years old. As a result, nearly one-third of VLCCs cannot meet the needs of charterers. Coincidentally, the number of VLCCs over 15 years old and exiting the mainstream market so far this year is almost equal to the number of new ships delivered by shipyards, suggesting that supply has remained largely unchanged.
global VLCC export shipments grew steadily from April to August, mainly due to the rise in Middle East exports to a six-year high (excluding April 2020), an increase in market share in West Africa, with exports from Latin America near a 12-month high and exports from the Gulf Coast hitting a record high. In October, the tonnage reached its peak. Due to the time difference between loading and unloading, it takes time for empty load to return to the next loading port, and the market may remain stable for the time being. In addition, OPEC's production cuts from November were based on October production, which increased by nearly 2.2 million barrels per day compared with January, so it did not have a significant impact on the VLCC market.
Gibson expects a mixed demand for VLCCs going forward. Assuming that the OPEC + production cut plan is advanced, the export volume of the Middle East may drop by nearly 1 million bpd. In addition, three new refineries in the region plan to increase their operating rates in 2023, which will affect exports. U.S. crude oil exports may also face challenges in the coming months, as the maintenance season for refineries in the U.S. Gulf region is coming to an end, and it is expected that exports from the region may face downward pressure.
positive factor comes from the volatile Afra and Suez tanker markets. In fact, VLCC's market share has grown from near zero to 20% this year on routes from the US Gulf, Latin America and West Africa to Europe. While the route isn't as long as the voyage to Asia, it locks some VLCCs into the Atlantic market, keeping the ships away from the Middle East. As long as VLCCs continue to offer lower unit rates than Afra and Suez tankers, their market share is expected to continue to rise. In addition, both China and India have increased their imports of Russian crude oil. In the future, Chinese and Indian imports to Russia will peak, which means that the increased imports will have to come from elsewhere, which in turn will support the large ship market.
Gibson believes that combining these factors, even if the current level of freight may be overvalued, the VLCC market has reason to remain optimistic. Overall, the sector's earnings are expected to be reduced in 2023, but will remain above the 2022 average until the next "black swan" event.
Product tanker market
oil tankers and operators, predicts that the EU embargo on Russian oil products will lead to a 7% ~ 8% increase in global demand for oil tankers per ton of nautical miles, which will continue until 2023 until the geopolitical situation changes.
Ardmore reported that the company's adjusted earnings for the third quarter of 2022 reached $61.6 million, a record high, helped by spot market TCE earnings of about $47000/day for medium-sized environmentally friendly tankers. The company said that the fourth quarter continued the performance of the third quarter, 40% of the shipment days have been booked, and the freight rate reached an average of US $45000/day.
's oil tanker TORM, said the strength of the oil tanker market will continue for some time and should be able to withstand the impact of the global economic slowdown. The company earned a net profit of $0.217 billion in the third quarter of this year, compared with a loss of $14.7 million in the same period last year.
Platts data shows that in the third quarter, the freight rate of 38000-ton ships on the US Gulf-UK/Continental Europe route fluctuated around US $45/ton, reaching a peak of US $77.08/ton on August 2 and falling to a low of US $26.98/ton on August 16. During this period, the average daily fluctuation was $3.90/ton, 7% higher than the $3.65/ton in the second quarter and 86% higher than the 52 cents/ton in the third quarter of 2019. So far in the fourth quarter of 2022, the average daily fluctuation is US $1.56/ton.