Tanker Shipping Market Overview & Outlook

Strong tanker markets as oil consumption reaches record high

Q2 2023
Tanker Shipping Market Overview & Outlook
Q2 2023 Highlights

Demand Supply Supply/demand

The IMF forecasts that the global As the order book is very small, the 6.0% In the crude tanker market, supply
2.9% economy will grow by an average of crude tanker fleet is expected to 1.6% and demand are expected to grow
3.0% during 2023-2024, 2.8% in 2023 grow by only 2.5% between 2022 respectively 1.6% and 5%-7% from
2.5%
and 3.0% in 2024. Risks remain tilted and 2024. 2022 to 2024.
to the downside.

3.2 Oil production in 2024 is forecasted Fleet growth for the product tanker 7.5% In the product tanker market, supply
to end 3.2 mbpd higher than in 2022. will be only 2.0% from 2022 to 2024, and demand are expected to grow
Production increases will be mainly in 2.0% as a small order book limits the 0.9% respectively 0.9% and 6.5%-8.5%
the Americas and Europe. growth potential. from 2022 to 2024.

The EIA expects record high We predict that average sailing speed The supply/demand balance is
consumption of 102.7 mbpd in 2024. will reduce supply by 1% in 2023 in expected to tighten significantly for
Increased activity in China and a both the crude and product tanker both crude and product tankers. A
102.7 global rebound in land and air travel -1% segment. combination of increased oil
are key drivers. consumption and longer hauls are
driving the market up.

3% As a result of the EU’s ban on Russian

oil imports, average hauls are
expected to increase by 3% in 2023.
Tanker Shipping Market Overview & Outlook
Markettanker
Strong strength
markets
sustained
as oilfor
consumption
another tworeaches
years record high

Demand We also still expect that an increase in estimated increase in consumption

average haul will add 3 percentage points between 2022 and 2024. The end to COVID-
We have increased the cargo demand to demand growth in 2023 for both the 19 restrictions in China is obviously a key
forecast in our base case scenario and now crude and product tanker market. This driver and especially drives increased
estimate that crude tanker volumes will represents the estimated impact of the demand for jet fuel.
increase by between 1% and 2% in both changed trade patterns since the European
2023 and 2024. This is an increase of 1 Union banned imports of Russian oil and oil
percentage point in 2023. For the product products. We expect that these sanctions
tanker market, we similarly increase our will remain in place throughout 2023 and
2023 cargo demand growth forecast by 1 2024 even if the war in Ukraine should
percentage point to between 2.5 and 3.5%, come to an end.
while we maintain an estimate of 1% to 2%
for 2024. Since our last report, the US Energy
Information Administration (EIA) has
increased its oil production and
consumption estimates. The EIA now
estimates that consumption will increase by
1.6 million barrels per day (mbpd) (1.6%) in
2023 and by another 1.7 mbpd (1.7%) in
2024. The additional production needed to cover
consumption is forecasted to come mainly
Consumption in 2023 is expected to reach from North America, but Central and South
101.0 mbpd and exceed 2019 levels for the America and Europe will also contribute. As
first time since the pandemic. In 2024, Russia has been quite successful in finding
consumption is forecast to hit 102.7 mbpd, new buyers for their crude and products,
a new record high. China (34%), India the EIA now forecasts that Russian
(16%), USA (16%), and the Middle East production will fall only 4% between 2022
(12%) combined account for 81% of the
Tanker Shipping Market Overview & Outlook
Strong tanker markets as oil consumption reaches record high

and 2024 instead of the 10% fall previously The potentially higher prices as well as any a greater negative impact and specifically
forecasted. adverse developments in the global the US, the EU, and Japan are predicted to
economy could hurt demand. see 0.4 percentage point lower growth in
As a result of production cuts announced, 2023 than in the base case. Economies with
OPEC’s production is expected to fall 1.2% close ties to the US such as the Mexican
in 2023 before rebounding in 2024. and Canadian are at greater risk of suffering
a slowdown than economies with loser ties
to the US.

In their base case, the International

Monetary Fund (IMF) predicts economic
growth of only 2.8% in 2023 and 3.0% in
These production cuts may put some 2024.
upward pressure on oil prices, and the EIA
forecasts that prices will increase by USD However, risks remain firmly tilted towards
5/barrel between May and September the downside and the IMF also presents a Given the consumption forecasts,
2023 before beginning to recede. Brent is low case scenario. Tighter financial developments in China are of particular
expected to average USD 79/barrel in 2023 conditions could reduce growth to 2.5% concern to the tanker market. The Chinese
and USD 75/barrel in 2024. and 2.8% in 2023 and 2024 respectively. economy grew 4.5% y/y in the first quarter
The advanced economies are likely to suffer
Tanker Shipping Market Overview & Outlook
Forecast
Strong tanker
still points
markets
to significant
as oil consumption
oversupply
reaches record high

of 2023, slightly behind IMF’s full year expected, Russian exports and EU imports Supply
growth forecast of 5.2%. Growth is have driven much of the increase in It appears that our previous estimate for
challenged by so far insufficient domestic average haul. ship recycling was too high. Year-to-date,
demand and a challenging global ship recycling has been significantly less
environment. From a tanker demand than we expected. We have therefore
perspective it has, however, been very reduced our recycling estimates, which in
positive to see the resurgence in both turn has increased our estimate for fleet
ground and air travel. growth.
Overall, we estimate that cargo demand in
2023 could end 1 percentage point lower
than our base case if global economic
growth ends near IMF’s low case.

However, year-to-date demand in both the

dirty and clean tanker trades have
developed very favourably. Tonne miles in
the dirty tanker trade have year-to-date
been 9.4% higher than in 2022 and the For now, we therefore believe there is only
clean tanker trade has seen a 7.5% a minor risk that demand will move lower
increase. than our base case forecast.

As expected, the gains have been a

combination of an increase in average haul However, we still estimate that fleet
and increased cargo volumes. Crude growth will remain quite limited. We expect
imports to China have been particularly the crude tanker fleet will grow only 2.5%
strong due to domestic demand as well as from end 2022 to end 2024 and the
an increase in oil product exports. As
Tanker Shipping Market Overview & Outlook
Strong tanker markets as oil consumption reaches record high

product tanker fleet growth is expected to The impact on the product tanker fleet has All in all, we estimate supply growth in the
be 2.0%. been slightly less as year-to-date average crude tanker segment of 1.1% and 0.5% in
sailing speed has fallen 1.1% y/y (0.1 knots) 2023 and 2024 respectively. The
However, so far this year supply has grown while congestion has increased 12%. corresponding figures for the product
slower than the fleet. Average sailing speed tanker segment are 0.3% and 0.6%.
has reduced while congestion has
increased, both factors taking supply out of
the market.

For now, we will stick to our previous

assumption that lower average sailing
speed will reduce supply for both crude and
Crude tankers have sailed on average 3.3% product tankers by 1% in 2023. Although
slower (0.4 knots) year-to-date than during year-to-date data points to higher
the same period last year. At the same congestion than last year, we have decided
time, congestion measured in ship days has not to include a full year impact on supply.
increased by 15%.
Tanker Shipping Market Overview & Outlook
Markettanker
Strong strength sustained
markets as oilfor another tworeaches
consumption years record high

Supply/demand balance be smaller, while new refineries in oil

producing countries must be expected to
Even though cargo volumes and tonne convert some crude shipments to product
miles quickly recovered from a seasonal dip shipments. Cargo growth is therefore
early in the year, freight rates have not yet higher in the product tanker segment.
been able to fully match the peaks of the
4th quarter 2022. Earnings, however,
remain solid and time charter rates and
second-hand ship prices are at their highest
levels since the financial crisis of 2008.

The outlook for both the crude tanker and

product tanker sector also remains firmly
positive. Fleet growth is limited by a very
small order book, while oil consumption in
2023 will exceed 2019 levels for the first Even though fleet growth is limited by the
time since the COVID-19 pandemic and small order books, supply could still
grow further in 2024. increase if operators decide to increase
sailing speeds. So far, operators have,
The increase in average hauls caused by the however, decreased sailing speeds and we
changed trading patterns following the EU believe they will remain below 2022 levels However, both sectors can look forward to
ban on Russian oil imports will remain key in the coming years, not least because CII a continuation of the very favourable
to the success of the tanker sector. We and ETS regulations encourage a reduction trading conditions experienced during the
assume that these sanctions will remain in in greenhouse gas emissions. past year and the longest period of market
place during 2023 and 2024, regardless of strength since the financial crisis.
whether the war in Ukraine ends or not. The outlook for the product tanker sector is
slightly more positive than for the crude
tanker sector. Fleet growth is expected to
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