Consultant forecasts tighter 2008 tanker market

Christopher E. Smith
Pipeline Editor

HOUSTON, Mar. 5 -- McQuilling Services LLC expects a rebound in both tanker spot rates and time-charter revenues during 2008, with demand outpacing supply in most sectors. McQuilling's annual Tanker Market Outlook doesn't anticipate much growth in demand, but instead sees the market tightening due to accelerated exits from the fleet for conversion.

Beyond 2008, McQuilling expects the tanker market to weaken as surplus tonnage grows. Strength once anticipated post-2010, driven by the scheduled phase-out of single-hull vessels by that year, has disappeared on a combination of asset owners' converting these vessels early and a 600,000 b/d softening in global oil demand growth for 2010 compared with last year's projections. McQuilling also anticipates double-digit tonnage supply increases in 2009.

For 2008, however, McQuilling expects demand for crude and dirty products tonnage to grow 1.2-4.1%, depending on the vessel sector, with 3.3% demand growth expected for very large crude carriers (VLCCs) in 2008 vs. no growth in 2007. VLCCs (265,000 dwt) operating on AG-Far East routes drew world-scale spot rates of 72 in 2007. McQuilling expects this level to continue on average through 2012, but with a 2008 spike up to WS 85. Other tanker segments will follow a similar spot-rate pattern, according to McQuilling.

For time-charter equivalent daily revenue, McQuilling expects VLCC's, which earned $39,800/day in 2007, to peak this year at $51,400/day before slipping to an average of $38,300 through 2012. This stands in contrast, however, to McQuilling's revenue forecast for the balance of the tanker market, which calls for a steady decline from 2007 through the end of the forecast period in 2012. Suezmax (130,000 dwt) vessels operating between West Africa and the US Atlantic Coast, for example, earned $39,100/day in 2007 but are expected to earn $37,700/day this year and $31,000/day through 2012.

Contact Christopher E. Smith at chriss@ogjonline.com.

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