Tanker Market May Face Difficult Q2, Q3 on Oversupply, Euronav Says

Photo credit: Euronav

By Jessica Jaganathan

SINGAPORE, April 25 (Reuters) – The tanker market may face a “difficult” second and third quarter this year after a robust first quarter as supply of newly built vessels loom, Belgian oil tanker operator Euronav said on Tuesday.

“The rates today are not the same as what we have seen in previous quarters,” Chief Executive Paddy Rodgers told Reuters on the sidelines of a shipping conference.

An additional 50 very large crude carriers (VLCCs) are estimated to be added to the global fleet of supertankers this year, putting pressure on freight rates.

Still, firm oil demand and a pickup in shale oil production has meant a robust first quarter for the VLCC market.

“The first quarter was pretty good.. And the second quarter did not start that badly,” he said.

“Most people will be returning numbers close to $40,000 a day for a VLCC which means you are profitable.”

A rise in shale oil production in the United States has created a new trade route from the U.S. East Coast to Asia, he said.

About 20 such voyages plied the route in the first quarter of this year, compared with none in the whole of 2016, he added. It is mainly being done by U.S. shale producers, Chinese buyers and a few traders.

“That’s been an important development… We had a significant number of voyages like that so I would imagine the rest of the industry is the same,” he said.

China’s crude imports from the Americas, led by Brazil, Venezuela and Colombia, hit 5.61 million tonnes (1.3 million bpd) in March, the highest in Reuters’ data going back to 2006.

“It’s absolutely full steam ahead in consumption of crude oil and we do not see that slackening off,” Rodgers said.

“We see a commitment to diversify sources of supply… it is clear that china wants to be a major regional player of refining, so they are buyers of crude, not product.”

Euronav operates 53 vessels including VLCCs and the smaller Suezmax tankers and is planning to add two more Suezmaxes by early 2018. (Reporting by Jessica Jaganathan; Editing by Amrutha Gayathri)

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