McQuilling Services Releases Mid-Year Tanker Market Outlook Update
McQuilling Services recently released the 2016 Mid-Year Tanker Market Outlook Update, which provides a review of the January Tanker Market Outlook as well as an updated forecast for the balance of 2016 through 2020 based on market conditions in the first half of the year. Findings from the report can be found below.
KEY FINDINGS
Global oil demand in 2016 is expected to rise by 1.38 million b/d to over 95 million b/d, representing a 1.46% increase year-on-year, before decelerating in the balance of our five year outlook. Looking ahead, we expect global supply of crude oil to reach 78 million b/d in 2016 and over 80 million b/d by the year 2021.
Total ton-mile demand growth is anticipated to decelerate to 1.3% in 2016, as weakening refining margins and supply disruptions in key loading regions (West Africa and Caribbean) negatively impact transportation requirements. Over the forecast period of 2016-2020, our models point to further deceleration of demand growth. We project an annualized growth rate of about 1.0%, below the historical trend of 1.7%. Our analysis of fundamentals resulted in a mostly downward adjustment to our freight rate forecasts.
In 2016, we project VLCC ton-mile demand to increase 3.2% due in part to increasing exports of Middle Eastern crude oil to US Gulf and West Coast refiners amid decreasing domestic production and short-term outages at Canadian upstream facilities. Suezmaxes are poised to contract 3.5% this year as a better positioned VLCC fleet diminishes West > East cargoes. Increasing intra-Far East flows and US crude exports are projected to support 1.5% ton-mile demand growth for Aframaxes this year.
Since 2011 we have seen robust increases in overall LR2 transport demand and expect 2016 to finish 6.8% higher than 2015 demand levels after growing by over 14% the year before. Actual data through April 2016 implies a pick-up in LR1 demand, suggesting a 3.9% growth from 2015 to 2016. For the MR sector in 2016, we project an increase of about 4.9% in ton-mile demand, supported by an increase of 4.6% in actual tons moved.
Asset prices for secondhand DPP tankers will see losses continue into 2017 amid a weakening rate environment, while CPP values may see a slight uptick amid a more stable earnings outlook. Declining shipyard capacity and higher commodity prices may lead to a slight increase in newbuilding values next year.
