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[/bd_table] Cuts in OPEC output that have led to a surge in U.S.
oil exports to Asia may prove a godsend for struggling global
shippers, driving rates for large crude shipments to China,
India and other major oil importers sharply higher over the
next year.
Operators such as Frontline Ltd , Euronav
and Gener8 Maritime are still recovering from five
years of weak rates and falling profits, and face more financial
headaches after a glut of new supertanker launches.
But OPEC’s strong compliance with output cuts agreed in 2016
is boosting prospects for the business by raising demand for
previously little-used U.S.-Asia routes and allowing tankers to
refill in the Gulf on return journeys to the United States.
“The impact of rising Asian demand will not be seen in strong
earnings in the next two quarters, because there is still the
problem of overcapacity,” said George Los, the head of tanker
research at U.S. ship brokerage Charles R. Weber Company.
“But by mid 2018 and by 2019 it will be able to make a notable
impact on VLCC (Very Large Crude Carrier) rates.”
The rate to ship U.S. crude oil from the Gulf of Mexico to
Singapore TD-LPP-SIN – still a relatively new route – has risen
more than 50 percent since August to stand at $15.54 per
tonne on Nov. 9, according to Thomson Reuters data.
Prices for the more traditional Middle-East to Asia route are
also up nearly 48 percent. Volumes for the U.S.-Asia route
nearly tripled to 5 million barrels in September since the
beginning of this year, as per Thomson Reuters shipping data.
“As this trend for U.S. exports to the Far East grows, the
positive impact on our business will be felt in the second half
of 2018 and beyond,” said Brian Gallagher, spokesman for
Belgian tanker operator Euronav.
Carnegie analyst Ola Ekern Rugsveen said average VLCC spot
rates have risen from $10,000 per day during the summer to
$30,000 in the months of September-October.
OPEC
U.S. crude exports have boomed since a forty-year old ban was
lifted less than two years ago and have been spurred further by
OPEC’s move to cap output a year ago, reaching 2.1 million
barrels per day in September of this year.
With Iran and Saudi Arabia putting aside differences that
prevented caps from functioning in the past, the premium that
users pay for OPEC-supplied Brent crude LCOc1 over U.S. light
crude CLc1 rose to almost $7 on Oct. 31 – its highest in more
than two years.
China has taken advantage of the widening spread, importing
about 115,000 barrels per day (bpd) from the United States
through September this year, up from a single cargo of under 1
million barrels between January and August a year ago.
India, the world’s third-largest oil importer, said earlier this
year it would buy crude from the United States for the first
time and Thomson Reuters Oil Research and Forecasts put
overall U.S. exports to Asia at around 261,000 bpd in the first
eight months of the year – 10 times more than 2016.
Up to September this year, 30 VLCCs – defined as those with a
capacity between 1.9 million and 2.2 million barrels – came on
line, according to shipping brokerage firm VesselsValue. That is
the result of orders placed when oil neared $200 a barrel last
decade.
VLCC spot prices now are about the same as what they were a
year ago and down 48 percent from the peak of $29.81 per
tonne in 2015, before crude hit its lowest of $27.88.
“We’re in a period of time where the fleet growth is quite
significant so there’s quite a bit of new tonnage coming into
the market, that’s what’s preventing the market from going
further,” Lars Barstad, commercial director of Oslo-based
Frontline said.
“We are cautious about the market going forward for the next
couple of quarters until the fleet has stopped to grow. But come
second half 2018 we think the market balance will kind of
improve for us.”
