Russian crude exports switch from EU to India buyers, with vessel-position data showing laden crude tankers en route. Tanker investors have gotten cold feet this winter, with spot rates down from November and stocks off earlier highs. Yet the bullish tanker thesis remains, with Evercore ISI analyst Jon Chappell noting spot rates remain far above long-term averages, and the upcycle for tanker owners and stocks “has only just begun.”
‘Rates are still strong.’ Why have rates pulled back this winter? FreightWaves interviewed Nick Watt of Argus, who attributed the decline to Europe’s chartering slowing after the Dec. 5th Russian crude ban, OPEC production cuts, and holidays. Ton-mile demand has not dropped, and sanctions are driving up voyage distance. Chappell described this as a “generational geopolitical event.”
China is expected to hike its imports of crude, particularly VLCCs, after Lunar New Year and COVID-19 cases subside. Sinopec has already increased purchases, including from Brazil. ~1M barrels/day of additional imports to China are expected in 2023, with some coming from the Americas. Tanker deliveries to collapse, with potential upside from China emerging from lockdowns, but downside risk of an actual recession. Vessel supply is easy to decipher: new tankers will slow this year, then collapse in 2024-25, as yard slots are full of container ships and gas carriers. The capacity of crude tankers on order is only 3.1% of tonnage on the water (Clarksons Research).
In 2022, 42 VLCCs were delivered, with 26 this year and two more on order for delivery in 2025/2026 (Clarksons). For Suezmaxes, 42 were delivered last year, nine this year, 6 in 2024, and 6 contracted for 2025. 20 Aframaxes were delivered in the previous year, 25 this year, nine next year, five on order for 2025, and 2 for 2026. According to Watt, owners should be excited for 2024/beyond due to the lack of deliveries.
Sources: https://www.freightwaves.com/news/sanctions-effect-begins-crude-tankers-forced-onto-longer-voyages
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