Oil Tanker Market Outlook - Intertanko Tanker Market Outlook –April 2017 © Maritime...

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Transcript of Oil Tanker Market Outlook - Intertanko Tanker Market Outlook –April 2017 © Maritime...

  • The Tanker Market Cycle Evolution and Outlook

    Intertanko HMP - April 2017

    Tim Smith Senior Analyst

    [email protected]

    + 44 (0)207 940 0078

    mailto:[email protected]

  • Maritime Strategies International www.msiltd.com2

    Agenda:

    1. Understanding the tanker market cycle

    2. Key drivers of tanker market fundamentals

    3. Policy and price: geopolitical risks and scenarios

    MSI Tanker Market Outlook April 2017

  • Maritime Strategies International www.msiltd.com3

    1. Understanding the tanker market cycle

    MSI Tanker Market Outlook April 2017

  • Tanker Spot Earnings Indices

    Maritime Strategies International www.msiltd.com4

    Tanker spot markets, represented by composite indices, have been trending downwards since the start of 2016

    Some stabilisation from lows seen in Q3 16 but conditions remain poor

    *MR Europe-US, LR1 ME-Japan

    **VLCC ME-Japan, Suezmax W. Africa-Europe, Aframax Med.-Med.-0.4

    -0.2

    0.0

    0.2

    0.4

    0.6

    0.8

    1.0

    1.2

    1.4

    1.6

    Jan

    -12

    Mar-

    12

    May-1

    2

    Ju

    l-12

    Sep

    -12

    No

    v-1

    2

    Jan

    -13

    Mar-

    13

    May-1

    3

    Ju

    l-13

    Sep

    -13

    No

    v-1

    3

    Jan

    -14

    Mar-

    14

    May-1

    4

    Ju

    l-14

    Sep

    -14

    No

    v-1

    4

    Jan

    -15

    Mar-

    15

    May-1

    5

    Ju

    l-15

    Sep

    -15

    No

    v-1

    5

    Jan

    -16

    Mar-

    16

    May-1

    6

    Ju

    l-16

    Sep

    -16

    No

    v-1

    6

    Jan

    -17

    Mar-

    17

    Index Jan 15 = 1

    Products Index* Crude Index**

  • 1 Yr T/C Rates Long-Term History

    Maritime Strategies International www.msiltd.com5

    The tanker market typically moves together

    1 Yr T/C rates across a wide range of segments are highly synchronised

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    Q1 9

    5

    Q4 9

    5

    Q3 9

    6

    Q2 9

    7

    Q1 9

    8

    Q4 9

    8

    Q3 9

    9

    Q2 0

    0

    Q1 0

    1

    Q4 0

    1

    Q3 0

    2

    Q2 0

    3

    Q1 0

    4

    Q4 0

    4

    Q3 0

    5

    Q2 0

    6

    Q1 0

    7

    Q4 0

    7

    Q3 0

    8

    Q2 0

    9

    Q1 1

    0

    Q4 1

    0

    Q3 1

    1

    Q2 1

    2

    Q1 1

    3

    Q4 1

    3

    Q3 1

    4

    Q2 1

    5

    Q1 1

    6

    Q4 1

    6

    Q3 1

    7

    Q2 1

    8

    $ k/Day

    MR LR2

    Suezmax VLCC

  • VLCC Contracting and Earnings

    Maritime Strategies International www.msiltd.com6

    Smoothing both VLCC contracting and T/C earnings as 3-year moving average shows the long-term link between freight market conditions and tanker ordering

    This relationship contributes to the cyclical nature of the tanker market

    0

    5

    10

    15

    20

    25

    30

    5

    15

    25

    35

    45

    55

    65

    1975

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    1977

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    1979

    1980

    1981

    1982

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    1993

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    2003

    2004

    2005

    2006

    2007

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    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    Mn Dwt$ k/Day

    VLCC 1 Yr T/C VLCC Contracting (RH Axis)

  • OPEC ME/WAf Production vs. VLCC 1 Yr T/C Rates

    Maritime Strategies International www.msiltd.com7

    Green lines show positive correlation between VLCC market and OPEC production

    Red arrows show contraction in rates, typically accompanied by pressure from the fleet

    0

    10

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    18 19 20 21 22 23 24 25 26 27 28

    $ k/Day

    Mn b/d

    1997-2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    2017

  • Maritime Strategies International www.msiltd.com8

    2. Key drivers of tanker market fundamentals

    MSI Tanker Market Webinar March 2017

  • -3%

    -2%

    -1%

    0%

    1%

    2%

    3%

    4%

    5%

    6%

    7%

    -30

    -20

    -10

    0

    10

    20

    30

    40

    50

    60

    70

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    Mn Dwt

    Deletions Deliveries End of Year Fleet Growth (RH Axis)

    Fleet Net Changes and Growth

    Maritime Strategies International www.msiltd.com9

    10+ K Dwt tanker fleet (includes crude and products) seeing strong rate of growth

    Driven by high delivery levels, whilst scrapping increase not guaranteed

  • Fleet Growth by Segment (Year Avg. Capacity)

    Maritime Strategies International www.msiltd.com10

    Tanker fleet growth is being driven by large vessels in both crude and products sectors

    LR1/2 fleet averaging close to 9% growth for 2-3 years, Suezmaxes well above average

    -2%

    0%

    2%

    4%

    6%

    8%

    10%

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    VLCC Suezmax LR1/2 Other Total (10+ k Dwt) Average

  • Oil Consumption and Price

    Maritime Strategies International www.msiltd.com11

    Oil price under sustained pressure, world has recalibrated to much lower price range

    Oil consumption growth stable and positive, but subject to macro and price shocks

    0

    20

    40

    60

    80

    100

    120

    140

    -2

    -1

    0

    1

    2

    3

    4

    5

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

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    2021

    $/bbl%

    World Oil Consumption Growth Oil Price (MSI Basket, RH Axis)

  • Refinery Capacity Expansion

    Maritime Strategies International www.msiltd.com12

    Asia and Middle East dominate incremental growth in refinery capacity expansion

    Further consolidation could occur in OECD regions, potentially accentuated by IMO sulphur regulations

    -60

    -40

    -20

    0

    20

    40

    60

    80

    100

    120

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    MnTpa

    China Asia excl. China Middle East+Africa Europe+FSU Americas

  • OPEC Cuts

    Maritime Strategies International www.msiltd.com13

    OPEC agreed in November to cut 1.2 Mn b/d of production in the first half of 2017

    This was the first agreement to cut production since the wake of the global financial crisis in 2008

    -1.2

    -1.0

    -0.8

    -0.6

    -0.4

    -0.2

    0.0

    0.2

    0.4

    0.6

    Ja

    n-1

    6

    Fe

    b-1

    6

    Ma

    r-1

    6

    Ap

    r-16

    Ma

    y-1

    6

    Ju

    n-1

    6

    Ju

    l-1

    6

    Au

    g-1

    6

    Se

    p-1

    6

    Oc

    t-1

    6

    No

    v-1

    6

    De

    c-1

    6

    Jan

    -17

    Fe

    b-1

    7

    Mn b/d

    Africa, Latin America Middle East

  • Crude Imports Incremental Change

    Maritime Strategies International www.msiltd.com14

    China remains key driver for crude trade growth but import expansion slowing

    Other regions such as Europe and US expected to act as a drag on crude imports

    -100

    -50

    0

    50

    100

    150

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    MnTpa (yoy Change)

    China Asia excl. China

    Europe Americas

    Other

  • Products Imports Incremental Change

    Maritime Strategies International www.msiltd.com15

    Product imports more diverse than crude less reliant on Asia

    Asia still very important but diesel imports into Europe play a large role in underpinning the market

    -40

    -30

    -20

    -10

    0

    10

    20

    30

    40

    50

    60

    70

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    MnTpa (yoy Change)

    Other Asia Europe Americas

  • Oil Trade Growth

    Maritime Strategies International www.msiltd.com16

    Crude and products trade growth appear to have realigned and decelerated after the sharp upturn in 2015

    MSI positive on outlook for next 2-3 years

    -4

    -3

    -2

    -1

    0

    1

    2

    3

    4

    5

    6

    7

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    2021

    % Growth

    Seaborne Crude Cargo Seaborne Products Cargo

  • Tanker Supply, Demand and Employment Rate

    Maritime Strategies International www.msiltd.com17

    Tanker market is being driven down by high rates of fleet growth and relatively muted demand.

    These conditions reverse those seen in 2014/15, generating a volatile cycle over the last 2-3 years

    86

    87

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    89

    90