Thursday, November 30, 2023
HomeHeadlinesStrong tanker market due to sanctions and high demand for oil -...


To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Strong tanker market due to sanctions and high demand for oil – Concordia Maritime

The product tanker market has strengthened significantly during April and May, with market rates at much higher levels than for both Q1 2022 and the full year 2021. At the end of May, average spot market earnings for an MR vessel (clean) was about $36,000 per day. The time charter market has also strengthened and a three-year contract for an MR tanker is currently $15,000-18,000 per day, depending to some extent on the vessel’s design. For a suezmax vessel, average spot earnings are about $22,000 per day. Volatility in the segment has been high during April and May, with occasional peaks at levels above $60,000 per day.

The VLCC segment is still at historically very low levels, which also imposes an indirect “cap” on suezmax vessels as charterers will combine two cargoes onto one larger vessel if suezmax segment rates become too high.

New trade patterns bring increased transport needs
The stronger product tanker segment is not only due to continuing high demand for oil but also changing trade patterns as Russian oil products are phased out in certain markets. This applies particularly to European diesel imports, which are now increasingly coming from the Middle East, Asia and North America. Overall, the phasing out of Russian oil has resulted in longer transport distances and increased transport efficiency.

The drivers also include structural changes in global refining capacity, where the impact of refinery closures in North America, Europe and elsewhere is now beginning to be felt in earnest. The fact that overall refining capacity has decreased west of Suez but has increased in Asia and the Middle East means longer transport distances, which is affecting the entire tanker market.

High oil prices affect earnings
It should be noted that average earnings are just an average. For both the MR and suezmax segments, earnings vary greatly depending on the type of vessel and geographical trading. By way of example, freight rates in the Atlantic have generally been higher than in Asia. Similarly, clean products have paid better than dirty ones. The difference in earnings is also due to a continuing high oil price. Since early March 2022, the price of Brent oil has been at levels above $100/barrel – and is currently at about $120/barrel. Large differences in bunker consumption between vessels of different age and design have in turn contributed to significant variations in earnings between “standard” vessels, modern ECO-design vessels and/or vessels equipped with “scrubbers”.

Longer distances
Geopolitical instability is also very likely to continue affecting oil and tanker markets going forward. Since the invasion of Ukraine, both the oil and tanker markets have been gradually trying to adapt to the new situation and we have yet to see the end result of this as sanctions continue to be imposed and trade routes are changing. However, increased European imports from more distant producers are likely to continue.

Meanwhile, according to the IEA (International Energy Agency), global oil demand is expected to grow by 3.6 million barrels per day from April to August 2022. The main contributory factors are eased restrictions in China, the US driving season and a continued recovery in aviation fuel demand.

All in all, this promotes a continued “cautiously optimistic” view of product tanker market development for the remainder of Q2 and the rest of 2022.

For our part, as previously announced, our vessels are employed on a five-year charter to Stena Bulk. The base rate is $15,500 per day. There is also the possibility of profit-sharing for freight exceeding the base rate, calculated on the basis of average earnings per vessel per half-year. Stena Bulk employs the vessels on a mix of short and medium-term contracts in both Asia and the Atlantic.

Source: Concordia Maritime

Related Posts


Finance & Economy
Shipping News

Euronav: Dividend Distribution For Q3 2023 & Business Update

Euronav NV provides a business and dividend update following the recent board and management changes. The Supervisory board has agreed to distribute USD 0.57 per...

A new chapter for Euronav

Euronav shareholders have approved strategic changes at the company ushering in a new era.

TEN Reports Earnings Results for Q3 & 9M2023

Tsakos Energy Navigation Limited reported earnings results for the third quarter and nine months ended September 30, 2023. For the third quarter, the company reported...

StealthGas posts near-record quarterly profit

STEALTHGAS INC. (NASDAQ: GASS), a ship-owning company serving the liquefied petroleum gas (LPG) sector of the international shipping industry, announced today its unaudited financial...

Golar LNG Reports Third Quarter Net Income of $114 Million

Golar LNG announced its interim results for the period ended September 30, 2023. Highlights include: Golar LNG Limited (“Golar” or “the Company”) reports Q3 2023 Net...

Baltic index extends rally on higher capesize rates

The Baltic Exchange’s dry bulk sea freight index rose on Tuesday for the fourth...

CLIA presents cruise industry’s Action Plan for Greeceto the Greek Government

Representatives of Cruise Lines International Association (CLIA), members of the Government, and key stakeholders...

Baltic index scales 1 and 1/2-year peak

The Baltic Exchange’s dry bulk sea freight index rose on Monday for the third...

Greek merchant fleet up in numbers, down in volume

The Greek merchant shipping fleet rose in numbers but fell in volume in September. More...

Celestyal unveils 3 new countries and 6 new ports for 2024 & 2025

Celestyal the award-winning, number one choice for cruise travelers to the Greek islands and...

Port Houston Breaks Export Record

October was the biggest month ever for loaded exports at Port Houston, up 6% compared to last October. Port Houston’s loaded exports are up...

Port of Piraeus working on first shore power connection slots for 2024

The Piraeus Port Authority (PPA), which manages the largest and busiest port in Greece, announced the first five shore power connection slots for ferry...

Two major US cruise operators interested in buying Lavrio port

The tender for the concession of Lavrio port is set to begin in the next few weeks. Sources tell Kathimerini there are at least two...

Biden Administration Invests Over $650 mln in US Ports to Strengthen Supply Chains

The U.S. Department of Transportation’s Maritime Administration (MARAD) announced over $653 million to fund 41 port improvement projects across the nation under the Port...

APM Terminals & DP World spearhead roadmap for accelerating electrification of port operations in bid for net-zero

APM Terminals and DP World announced an initiative to accelerate decarbonisation of the world’s terminals through the widespread electrification of container handling equipment (CHE)....