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BIMCO: Geopolitics dominate the oil tanker market

BIMCO: Geopolitics dominate the oil tanker market

Oil tanker market developments dominated by geopolitics in the last decade, says BIMCO.

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In recent weeks and months, crude oil and commodity tanker markets have experienced high uncertainty, mainly due to geopolitics and the ever-changing situation on the global oil markets. In the fourth quarter of 2019, the first major disruption since the collapse in oil prices between the fourth quarter of 2104 and first quarter of 2016 came in.

In these exceptional times the freight prices are dominated by external forces rather than the dynamics of the oil tanker market's supply and demand. However, as the situation begins to normalize slowly, these fundamentals will take over again with overcapacity becoming a recurring problem.

“The volatility currently experienced by the tanker market, and the record high freight rates across many of the sectors in particular, dwarfs the ups and downs which were seen in the majority of the previous decade. The market cannot rely on geopolitics to keep rates this elevated in the longer term and the oil tanker market will once again feel the pressure of its poor fundamentals,” stated Peter Sand, BIMCO’s Chief Shipping Analyst.

Between 2010 and 2019, the crude oil tanker fleet's cargo carrying capacity rose by 42.2% and the commodity fleet by 49.5%. This compares to a much lower demand growth of 6.3% and 18.1% respectively over the same period. Overall, by the end of 2019 the tanker fleet expanded by DWT 190.5 million to DWT 622.6 million. Just under a third are tankers for oil products while the remainder are tankers for crude oil.

A ton of crude oil produced an average of 4,640 tonne-miles at the start of the decade. Over the course of the decade, this number grew by 13.8 percent and by 2019, each tonne was producing an average of 5,280 tonne miles. Growth in average sailing distance was driven in part by increased U.S. exports of crude oil, which began at the end of 2015 when the ban on crude oil exports was lifted.

As the major crude oil importers are located in the Far East, the increased share of crude oil coming from the US rather than the Middle East has increased the average sailed distance. The decrease in average haulage in 2015 was caused by several developments including higher Middle East exports, coupled with lower African exports and lower US imports.

Maritime Business World 

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