From Singapore's Manifold Times, May 26:
Peter
Sand, Chief Shipping Analyst at BIMCO, on Monday (25 May) published an
update on the full impact of falling fuel demand worldwide on the
shipping industry now that tensions in the trade war are being
allayed:
Overview
Geopolitical tensions have now eased,
leaving freight rates to feel the full effects of the weak underlying
market and falling demand. Tanker shipping looks set to be under
pressure for the rest of the year.
Demand drivers and freight rates
The tanker shipping industry was once
again caught in a whirlwind, as freight rates skyrocketed with little
regard to the poor market fundamentals before the latter once again
caught up with rates. Geopolitics continues to dominate the headlines
when it comes to the tanker market, and developments in the supply of
oil overshadow the steep drop in demand caused by the Covid-19 crisis.
Floating storage has also increased primarily due to the mismatch
between oil production and oil demand, tightening tonnage availability
in the market and further supporting freight rates.
This drop in demand is illustrated by
the collapse in oil products being supplied in the US: gasoline fell by
37.7% from 3 January to 3 April, a loss of 3.1 million barrels per day
(bpd), but has since recovered some of that lost supply and, as of 15
May, stands at 6.8m bpd (down 16.5% from 3 January). The supply of jet
fuel has fallen by 62.5% since the start of the year, standing at 0.6m
bpd on 15 May (down from 1.6m bpd on 3 January).
April was certainly a month to
remember, with the biggest oil-producing nations setting off a price war
and flooding the market with millions of extra barrels each day – at
the same time as demand was collapsing.
The OPEC+ (an expanded alliance of
countries collaborating to control the world production of crude oil)
production cut that was eventually agreed, and has now come into force
is, however, still not enough to balance the oil market after lockdown
measures around the world cut demand for all oil products.
The chartering spree from Saudi
Arabia, as it prepared to flood the market with its cheap oil in April,
led average Very Large Crude Carrier (VLCC) earnings to soar to USD
279,259 per day on 13 March, with rates staying high until the end of
April. However, since then, as oil production has been cut and the
reality of an oversaturated market hit home, rates have dropped to USD
42,547 per day on 22 May. Rates will continue to fall, as the global
economy is unable to provide the demand needed to keep them elevated.
As is often the case, rates for the
smaller crude oil tankers followed the paths of the VLCCs with Suezmax
earnings peaking at USD 120,870 per day before falling to USD 30,992 on
22 May. Aframax earnings peaked later, reaching USD 83,921 per day on 24
April before falling to USD 26,959 per day on 22 May.....
....MUCH MORE
