Seaborne crude oil trade indicators so far in 1997 appear positive, driven by increasing oil demand in Asia and in member countries of the Organization for Economic Cooperation and Development (OECD).
That assessment is by Clarkson Research Studies, London.
"Our outlook this year is colored by the rather positive state of the world economy," Clarkson said.
"For once," said Clarkson, "all the economic regions are growing in unison and look set to reach a peak towards the end of this year."
Recovery stage set
According to Clarkson, in fall 1996, tankers were steering a course toward recovery.
During 1996, it said crude oil trade, including European intra-regional trade, is estimated to have risen by 4% to about 32.3 million b/d, with the expansion driven by increased refinery throughput, global demand growth of 1.7 million b/d, and low inventories.
At the same time, the fleet of crude tankers exceeding 80,000 dwt expanded by a mere 1.3% to 207.9 million dwt.
At the time, Clarkson said, it appeared the outlook for tankers "is becoming very positive," noting that it expected oil trade to grow by 3.7% in 1996 and 3.1% in 1997. "Admittedly, short-haul oil continues to dilute ton-mile growth but will not neutralize it," Clarkson said. "In short, the tanker market is ready for another step up."
Its more recent forecasts for trade growth are 4.1% for 1997 and 2.2% for 1998.
Key market occurrences
During the 6 months to spring 1997, Clarkson said the rate of scrapping had declined-less than half the level in 1996.
Combined with continued deliveries, this boosted the fleet to 278 million dwt from 276 million dwt.
Clarkson said the upward trend was more than counteracted by supply adjustments, resulting in a net reduction in active trading.
Combined oil carriers eased back to 11.2 million dwt from a peak level of 11.9 million dwt reached in September 1996.
Lay-ups increased to 5.2 million dwt from 3.3 million dwt as some ultra-large crude carriers made the lay-up list.
Tankers utilized in storage rose significantly to 11.3 million dwt from 8 million dwt.
Clarkson said, "After these adjustments, the active tanker fleet fell from 276.5 million dwt to 273.7 million dwt in March 1997, a net 2% reduction."
On the demand side, short-haul oil production increased by 1.5% in second half 1996, and there was a small hike in long-haul production.
"Taken together, we estimate that tanker demand increased by about 1.1% over the last 6 months. On that basis since, the autumn tanker fundamentals have improved by 3%," the consultant said.
While tanker market spot rates have improved since fall 1996, Clarkson said average earnings during the last 6 months were a disappointing 1.2% lower than the previous period as stronger prices raised bunker costs.
Crude tanker outlook
Clarkson contends that "preliminary indicators point to encouraging prospects for 1997."
According to Clarkson, short-haul exports are set to rise again in 1997, supported by resumed Iraqi exports from the Turkish terminal of Ceyhan. In 1997, Clarkson expects short-haul exports to grow by 6% and long-haul exports to grow by 1%, resulting in an increase in demand for tankers of about 3.3%.
The consultant said annual trade growth has been forecast at 4.1%, supported by rising import demand in Asia and in OECD economies. But, it noted, overall growth "is largely dependent upon the scale of the downward movement in oil prices and the subsequent incentive to rebuild stocks and boost refinery throughput."
In addition, Clarkson said it expects minimal fleet growth of 0.3%.
At the end of February 1997, Clarkson data indicated the crude tanker market consisted of 442 very large crude carriers (VLCCs), 280 Suezmax tankers of 120,000-200,000 dwt, and 454 Aframax vessels of 80,000-120,000 dwt (see diagram, p. 29).
At the start of June, Clarkson data indicated 7.8 million dwt was scheduled for delivery in 1997, while demand growth of almost 9 million dwt is expected.
Crude market factors
Latin American and North Sea trade is expected to post another strong year in 1997 in terms of incremental growth in exports.
North American exports in 1997 are expected to remain relatively flat (see table, p. 26 [27,590 bytes]).
Exports from outside the Middle East continued to increase during 1996, with notable increases seen in Latin American, African, and North Sea trade, said Clarkson.
Latin American trade expanded by about 500,000 b/d, followed by North Sea and African increases of roughly 200,000 b/d each.
Seaborne exports from the former Soviet Union increased slightly by a little more than 100,000 b/d.
In 1997, overall exports are projected to increase 1.1 million b/d, which will be supported by additional growth in supply, according to the consultant. Of this, it said, the North Sea could post the largest increase, of about 300,000 b/d, while exports from Latin America are expected to rise about 200,000-300,000 b/d.
Clarkson anticipates that the African export trade will grow by only about 100,000 b/d in 1997. However, surplus capacity could rise, if refinery maintenance problems persist.
For long-haul shipments, Clarkson projects further growth in this area after a 1996 increase of more than 200,000 b/d.
"At current demand and supply projections, exports are to rise a further 200,000 b/d this year. However, this is largely due to resumed flow from Mina al-Bakr," Clarkson said, adding that exports from the Turkish port of Dortyol could average 400,000-500,000 b/d, depending on price.
Imports outlook
Clarkson maintains that "strong fundamentals" point to firm oil trade growth in 1997.
On the imports side, Chinese imports in 1996 jumped by about 30% to about 450,000 b/d as domestic production lagged refinery demand.
Imports into Asia rose by 7% overall in 1996 despite a 1% fall in Japanese imports, as refiners cut throughput. For the region as a whole, imports are forecast to rise 13% this year on firm demand growth, relatively static Asian crude production, and continued refinery expansion.
Some growth in Japanese imports is also forecast, based on refinery throughput gains thus far in 1997 and anticipated capacity additions.
Venezuelan exports to the U.S. averaged about 1.3 million b/d in 1996. U.S. imports from Mexico and Colombia also increased, rising by 200,000 b/d.
Saudi Arabia slipped from the largest to the second-largest exporter to the U.S., as imports from that source fell 1% to 1.25 million b/d. But Clarkson said the fall was largely offset by increased supplies from Kuwait.
U.S. imports from the Middle East remained relatively steady overall against total import growth of around 4%.
For 1997, U.S. imports from outside North America are to rise 1.5% to almost 6.8 million b/d
VLCC dynamics
VLCCs continue to dominate oil movements from the Persian Gulf and have made gains as the short-haul oil trade has continued growing, Clarkson said.
Little growth in the fleet is predicted in 1997-99 (see table, p. 26), but, overall, the Clarkson forecast for this segment is generally bullish.
Contracting for newbuild tankers has increased. In 1996, 5.9 million dwt of new orders were contracted, compared with just 1.6 million dwt in 1995. As of the end of February 1997, 2.3 million dwt of new orders had been placed. This has risen to 5.8 million dwt, according to the most recent fleet information.
Clarkson said, "Although this may be partly optimism within the VLCC market, it is the dollar-yen position that has given the fundamental impetus as the yards have become aggressively competitive on price.
"VLCC newbuildings have also become increasingly competitive with secondhand tonnage prices."
The 127.2 million dwt of VLCC tonnage in the 442-vessel fleet has been expanding. As of Mar. 1, 1997, the total represented an increase of 1.9 million dwt since Sept. 1, 1996.
As a percentage of the total tanker fleet of 279.2 million dwt, VLCCs represent 45.6%, Clarkson said.
Clarkson forecasts that the size of the VLCC fleet-41.3% is now 20 years or older-will continue to shrink, while the number of double-hulled tankers is increasing. That segment, totaling about 63 vessels, represents about 14.4% of the fleet.
In addition, the number of VLCCs laid up has continued to increase, rising to 2.9 million dwt from 1.3 million dwt in September 1996. At the time of Clarkson's spring 1996 study, 1.7 million dwt was in lay-up.
The number of vessels used for storage has increased. Tonnage has risen to about 8.1 million dwt, up from 5.7 million dwt 6 months earlier.
In 1996, deliveries of VLCCs totaled 6.7 million dwt, a 9.4% decrease from 1995 figures.
For all of 1997, 2.6 million dwt was scheduled for delivery at Mar. 1, 1997. Of this, 1.5 million dwt had been delivered in the first 2 months of the year. For 1998, deliveries are expected to reach 7.8 million dwt.
The number of vessels that went to the breakers in 1996 totaled 14, or about 3.8 million dwt-a significant reduction compared with the 30 vessels totaling 7.6 million dwt that were sold for scrap in 1995.
By the beginning of March, three vessels totaling about 700,000 dwt went to the breakers. Clarkson predicts 3.6 million dwt will be sold for scrap in 1997, in line with its generally bullish forecast for this segment, but scrapping could increase next year as the fleet's age profile continues to deteriorate.
Clarkson said owners of 1970s-vintage tankers are faced with conducting their fifth special survey or choosing demolition. Clarkson said an estimated 11 vessels are due for a fifth survey this year, and another 68-15% of the current fleet-are expected to face such surveys in 1998-99.
Of the 191 ships that comprise the 20.1 million dwt combined oil carrier vessel fleet, Clarkson said the number of VLCC-sized combos in oil held steady since September 1996 at about 900,000 dwt before rising to 1.5 million dwt in February 1997.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
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