CRUDE OIL TANKER MARKET - Intertanko · intertanko - istanbul tanker event 2008 market session 23...

INTERTANKO - ISTANBUL TANKER EVENT 2008MARKET SESSION 23 APRIL

CRUDE OIL TANKER MARKET

- CURRENT MARKET CONDITIONS

- TRENDS IN TANKER TONNAGE DEMAND

- CONVERSIONS / PHASE-OUT OF SINGLE HULL TANKERS - MARKET OUTLOOK TO 2011

- WORLD SHIPPING AND CLIMATE CHANGE

R.S. Platou Economic Research a.s


A STRONG FIRST QUARTER IN THE TANKER MARKET...

97.198.1

99.12000.1

01.102.1

03.104.1

05.106.1

07.108.1

70

75

80

85

90

70

75

80

85

90

MBD

GLOBAL OIL PRODUCTIONMONTHLY 1997-2008

Heavy stock-drawing

Heavy stock-drawing

Stock-drawing

Sharp outputrise

19971998

19992000

20012002

20032004

20052006

2007 2008 YTD0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

1,000 $/DAY

* Weighted by dwt.

TANKER MARKET INDEX* ANNUAL AVERAGES 1997-2008

UPDATED TO: APRIL 18

Sharp outputrise

Heavy stock-drawing

Stock-drawing

Sharp outputrise in M East

Sharp outputrise in M East

Heavy stock-drawing

J F M A M J J A S O N D J F M A .

0

25

50

75

100

125

150

175

200

225

250

0

25

50

75

100

125

150

175

200

225

250

$ 1,000/DAY

SUEZMAX AFRAMAX PANAMAX VLCC

T/C-RESULTS FOR CRUDE CARRIERS 2007- 08 WEEKLY

20022003

2004 2005

2006 2007 2008 YTD

0

20

40

60

80

100

0

20

40

60

80

100

$ 1,000/DAY

VLCC SUEZMAX AFRAMAX PANAMAX DIRTY.Notes: Rates are calculated at fixing dateWaiting days for cargo are not included

AVERAGE T/C-RESULTS FOR CRUDE CARRIERS2002-08

UPDATED TO: APRIL 18

20082007

.....ESPECIALLY FOR CRUDE CARRIERS


9798

99

00

01

02

03

04

0506

0 20000 40000 60000 80000 100000

VLCC RATES

0

20000

40000

60000

80000

SUEZ

MA

X R

ATE

S

CORRELATION BETWEEN SUEZMAX AND VLCC RATES1997-2008

R2=0.94

07 * 08q1

......AND VLCC WAS THE WINNER!

First quarter 2008:Compared with the historical relationVLCC got a premium vs Suezmax of$17,000 per day in the first quarter.

VLCC fleet growth on a declining trendcombined with a 6 % output growthin the Middle East are supportingmarket conditions for this segmentsignificantly.

*07q4

*07q3

*07q2

*07q1


96.197.1

98.199.1

2000.101.1

02.103.1

04.105.1

06.107.1

08.116

18

20

22

24

16

18

20

22

24

MBD

MIDDLE EAST CRUDE OIL PRODUCTIONMONTHLY 1996-2008

04.1

05.1

06.1

07.1

08.1 .

-6

-4

-2

0

2

4

6

8

10

12

14

-6

-4

-2

0

2

4

6

8

10

12

14

PERCENT

MIDDLE EAST CRUDE OIL PRODUCTIONYEAR-ON-YEAR GROWTH

MONTHLY 2004-08

MIDDLE EAST PRODUCTION UP 6% IN THE FIRST QUARTER....


96.197.1

98.199.1

2000.11.1

2.13.1

4.15.1

6.17.1

8.1-5

0

5

10

-5

-2.5

0

2.5

5

7.5

10% GROWTH FROM SAME QUARTER YEAR BEFORE

SEABORNE OIL TRADEQUARTERLY 1996 - 2008

96.197.1

98.199.1

2000.11.1

2.13.1

4.15.1

6.17.1

8.1

20

30

40

50

20

30

40

50

MBD

CRUDE OIL PRODUCTIONQUARTERLY 1996 - 2008

OPEC CRUDEExcl Angola and Ecuador

NON-OPEC

SEABORNE OIL TRADE

...DRIVING SEABORNE OIL TRADE - UP 6% IN THE FIRST QUARTER

5 YEARS MOVING AVERAGE GROWTH RATE


TRENDS IN TANKER TONNAGE DEMAND


1997 1998

1999 2000

20012002

20032004

20052006

2007-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

PERCENT CHANGE

.

DEMAND FOR TANKERSANNUAL CHANGES 1997-2007


97

98

99

2000

01

02

0304

05

06

07

-3 -2 -1 0 1 2 3 4 5

OIL PROD GROWTH IN % (IEA)

-4

0

4

8

12

-4

0

4

8

12

TANKER TONNAGE DEMAND GROWTH IN % (RSP)

OIL PROD GROWTH VS TANKER TONNAGE DEMAND ANNUALLY 1997-2007

Tonnage demand was 4 to 5 percentage points higher in 2006 and 2007 than the historical correlation indicates. WHY?

IEA's med-term report July 07 predicts a 2.2% average growth pa 2007-12

WHAT IS THE LONG-TERM UNDERLYING TREND IN TONNAGE DEMAND?

Tanker tonnage demandincreased by 4.5 % per year in 2005-07

SUPPLY GROWTHDEMAND GROWTH

-2

0

2

4

6

8

PERCENT GROWTH

TANKER MARKET FUNDAMENTALS 2007 VS 2006

Trade volumes rose 1.0%

ADDITIONAL FACTORS HAVE SUPPORTED TANKER TONNAGE DEMAND IN THE LAST TWO YEARS.

Distances increased 1.5%

Ton-miles: + 2.5%

Less tankers used for floating storage -0.5%

Tonnage demand + 4.0%Reduced productivity 2.0% (two-tier market, slowsteaming etc)

Fleet growth 5.0%

Utilization rate fell by 1%

World oil production increased only 0.2% !

Tanker index fell from $44,600 to $39,800


TONNAGE DEMAND PROSPECTS

Average annual growth 2005-07 2007-12OIL PRODUCTION +0.8% +1.5% +2.2% (IEA, JULY 2007)SEABORNE OIL TRADE (VOLUME) +1.3% +2.0% TRANSPORT DISTANCES +1.1% +1.5%TONNAGE DEMAND +4.5% +4.5%

- Based on a 1.5% oil output growth (we think IEA is too optimistic), increased distances and a modest reduction in productivity we expect the underlying tanker tonnage demand growth 2007-11 to stay around 4.5% per year.

- Due to low oil inventories at the start of 2008, the current high OPEC production level and record-high oil prices we expect tonnage demand to increase by 6% in 2008. We assume OPEC will keep the current output level with prices above $80.


CONVERSIONS / PHASE-OUT OF SINGLE-HULL TANKERS


REMOVAL OF TANKERS - IMO PHASE-OUT

DOUBLE HULL287.7

78.7%

DS/DB18.1

4.9%

SH CAT 2/358.8

16.1%

SH CAT 11.00.3%

PHASED OUT DATE APRIL 2005

TO BE PHASED OUT WITHIN END2010, UNLESS FLAG STATES AND PORT STATES MAY ALLOW FURTHER TRADING

TO BE PHASED OUT WITHIN END 2015

2008 2009 2010 2011 2012 2013 2014 20150

20

40

60

Mill. DWT

0

20

40

60

Platou scenario incl. conversions IMO phase-out schedule

TANKER REMOVALSYEARLY 2008 - 2015

All figures excluding chemical carriers in mill dwt

Scrapping

Conversion


97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

MILL. DWT

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

PERCENT FLEET GROWTH

DELIVERIES OF TANKERS

REMOVALS OF TANKERS

SCRAPPING CONVERSIONS FLEET GROWTH

TANKER FLEET TREND 1997-2012

PERCENTAGE CHANGE :

07 08 09 10 11--------------------------------------------------10-200 7.1 6.7 9.4 4.9 0.8200+ 2.9 1.6 2.9 3.5 4.6 --------------------------------------------------TOTAL 5.3 4.6 6.9 4.3 2.3

---------------------------------------------------CRUDE CARRIERS 3.7 2.3 4.4 3.7 2.6

PRODUCTCARRIERS 11.8 13.1 15.0 6.3 1.3 ------------------------------------------------NOTE: EXCL CHEMICAL CARRIERSALL DATA ARE ANNUAL AVERAGES

CONVERSIONS THE WILD CARD


DELIVERIES 2008-12 BASED ON CURRENT ORDER BOOK

-5%

0%

5%

10%

15%

-5%

0%

5%

10%

15%

YoY change

Aframax Suezmax VLCC

FLEET DEVELOPMENT2003-10

Conversions to dry cargo and FPSOs No of vessels

Afra Suez VLCC2008 ytd 0 2 32008 rest 16 14 412009 16 16 44

Avg. size 93 145 270

2006 2007 2008 2009 2010200520042003

STRONG FLUCUATIONS IN THE FLEET GROWTH


MARKET OUTLOOK TO 2011


2004 2005

2006 2007 2008

20092010

2011

0

20

40

60

80

100

0

20

40

60

80

100

$ 1,000/DAY

VLCC SUEZMAX AFRAMAX

.

T/C-RESULTS FOR CRUDE CARRIERSACTUAL AND FORECAST

2004-2011

OUR BASE CASE FORECAST FOR 2008-2011

TONNAGE DEMAND GROWTH2008: +6.0 %2009-11: +4.5% PA


2004 2005

2006 2007 2008

20092010

2011

0

20

40

60

80

100

0

20

40

60

80

100

$ 1,000/DAY

VLCC SUEZMAX AFRAMAX

.

T/C-RESULTS FOR CRUDE CARRIERS ACTUAL AND FORECAST

2004-2011

... AND A MORE PESSIMISTIC ONE WITH LOW TONNAGE DEMAND GROWTH

TONNAGE DEMAND GROWTH2008-11: +3.0% PA


Industry

14.0%Other energy related

5.0%Waste

3.0%

Agriculture14.0%

Land use

18.0%

Buildings

8.0%

Transport excl shipping

12.5%

Shipping1.5%

Power

24.0%

Greenhouse gas emissions in 2000, by source

Source: WRI (2006)

NON-ENERGYEMISSIONS

CLIMATE CHANGE: WORLD SHIPPING IS ONLY RESPONSIBLE FOR 1.5 % OF GLOBAL GREENHOUSE GASES, BUT.....


... IS PROBABLY THE FASTEST GROWING SECTOR

-2

0

2

4

6

8

10

12

-2

0

2

4

6

8

10

12

EMISSIONS OF GHGsANNUAL GROWTH RATE IN %

1990s

WORLDTOTAL

SHIPPING"BUSINESS AS USUAL"

SHIPPING

2008-2020

?

?

?

GHG REDUCTION POLICY

We assume that world shipping's emissionsof GHGs are closely linked to bunker consumptionand the fleet growth.

World merchant fleet is currently growingby 8 to 9 % pa in line with the tonnage demandgrowth trend.

Can world shipping reduce emissions of GHGs?

Reduction measures Reduced emissions

Main engine 2-3 %Optimal hull shape 6-12 %Improved propulsion syst 3-6 %

Speed reduction of 20 % 45 % (Gross) appr. 35 % (Net)* * More ships are needed to carry out the same number of ton-miles


CRUDE OIL TANKER MARKET

- A relatively strong crude carrier market is expected in 2008 due to higher OPEC production and a slow fleet growth.

- There will be a sharp acceleration in deliveries of newbuildings in 2009 leading to weaker freight rates.

- Most of the remaining single-hull tankers will be removed from active trading within the end of 2010 and result in a weak fleet growth in 2010-11 and a rate recovery these years.

- The trend in oil output, economic growth and bunker prices will determine the future growth in tanker tonnage demand. We expect the long-term underlying growth trend to be around 4 to 5 percent per year, but oil output "problems" and slower economic growth could lead to a significantly weaker demand growth.

- Possible new regulations to cut greenhouse gas emissions from ships could lead to slower speed and an increased need for newbuildings.


THANK YOU FOR YOUR ATTENTION!

If you would like to study the shippingmarkets even more thoroughly you could go to

www.platou.com

and find our annual market report.

CRUDE OIL TANKER MARKET - Intertanko · intertanko - istanbul tanker event 2008 market session 23...

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