Oil Tanker Owners Scrap Record Number of Ships
Oil tanker owners scrapped a record number of ships this year. Those who did missed out on a sharp rally in rates.
Owners purged a record 100 of the industry’s main crude carriers so far, with most of that happening in the first half of the year, according to data from Clarkson Research Services Ltd, part of the world’s biggest shipbroker.
That is no surprise, as up to September the vessels — which transport roughly 40 percent of the world’s crude — were on course for the worst average earnings in at least three decades.
What those demoralised owners perhaps failed to foresee was a sudden surge in cargoes.
With the US poised to impose sanctions on Iran earlier this year, producers including Saudi Arabia and Russia began adding barrels to the market.
Between May and November, the world’s largest and second-largest exporters lifted their combined output by about 1.5 million barrels a day. American shipments are also soaring.
As well as adding demand for vessels, the increased oil supply also drove down fuel prices — the industry’s single biggest expense.
For those owners who did not scrap, rates jumped more than threefold from late September to mid-December, according to Clarkson figures.
Up in the North Sea, ships which move 600,000-barrel cargoes earlier this week were earning US$72,664 a day, the highest in three and a half years, according to data from the Baltic Exchange in London.
At the start of December, giant two million-barrel carrying vessels were making US$58,000 from delivering Middle East oil to China, the most since at least the start of 2017.
West African rates also surged.
In transportation capacity terms, this year’s scrapping is the highest since 1985. But the surge in earnings does not mean owners were wrong to demolish — even if some might have benefited from waiting a little longer to do so.
The Organisation of Petroleum Exporting Countries and allied producers announced on the 7th December that they would reset a pact to limit global crude production starting in January, restricting the flow of cargoes and potentially bolstering fuel prices.
Saudi Arabia is making huge cuts as part of that. That is on top of major exporters Iran and Venezuela, whose output and exports have been crushed by sanctions and economic meltdown.
There is not a lot of point having a ship, with all the running costs that entails, if you cannot find cargoes.
Source: Rigzone