MSI: Tanker Earnings to Bounce Back in Q2

VLCC, Suezmax, Aframax and product tanker rates are expected to rebound in the second quarter of 2016 supported by oil market fundamentals’ recovery, according to Tanker Freight Forecaster from Maritime Strategies International.

Though last month saw a fall in VLCC spot earnings, rates are set to rise in the second quarter on high crude supply which looks likely to persist until the summer. Suezmax spot earnings are forecast to improve from February levels by May, MSI said.

Aframaxes should also benefit from Russian crude exports from Kozmino to Chinese refineries with the International Energy Agency estimating ex-Kozmino volumes at 1m b/day this year, double the total in 2015.

“After rate declines in all three crude segments last month – and earlier this month for VLCCs – there is stronger upside support as we enter Q2. Longer-term dynamics could be affected negatively though, if a meeting between major oil exporters in April succeeds in curbing production,” Tim Smith, Senior Analyst at MSI, said.

Strong oil supply is propelling the large tanker market, with data showing OPEC exports are expected to rise by more than 400,000 b/day at 17.7m b/day in March.

This figure is expected to increase in April, based on MSI’s data, as Saudi Arabia offers Asian customers discounts as it tries to maintain market share before the impending return of Iranian volumes and seasonal lull due to refinery maintenance. By comparison, US oil output has dropped to 9.08m b/day, the lowest level since November 2014.

MR product tanker spot earnings are also forecast to improve, potentially surpassing USD 18,000/day by May from below USD 13,000/day in February with the market expected to find support from growing Chinese diesel exports driven by a surplus that could double to 220,000 b/day according to some estimates.

On the fleet supply side, MSI reports a considerable weakening in tanker investment appetite as the end-2015 rush for ships dented new activity this year. Total delivery and deletion volumes were weak in February, totalling 1.5m dwt and 0.1m dwt respectively, pushing the fleet up to 532.9m dwt.

In the outlook for the next six months, significant fleet expansion is expected as the fleet will grow by 12.3m dwt to 545.2m dwt.

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