This year, tanker shipping will not benefit from the usual strong winter seasonal effect. Although new lockdowns are less strict in many countries, the oil supply glut of Q2 will have a negative impact on tanker sea freight. Recent news about the effectiveness of the vaccine has raised hopes of improving global oil demand. But everything happens slowly and at least until 2022 the situation will not return to pre-pandemic. The arrival of winter usually gives a seasonal boost to tanker demand.
Although many things have changed in 2020, many still hoped for a slight improvement in this section. However, new restrictions dashed these hopes as infection cases increased and stocks fell. Oil product tankers earning indicates that this year winter boost is canceled.
As a result, An LR2 can expect to earn just $ 7.416 per day on the spot market. An LR6 can also expect to earn $ 6.147 per day. A Handysize is looking at average earnings of $ 1,730 per day. Bear in mind, for oil product tankers to be profitable, these daily rates must cover both operational and financing costs. But they are a long way from doing at current levels. This is the inevitable result of the wave of low-priced cargoes in April and the massive demand impact the pandemic has had.
The monthly income of an MR tanker in the fall of 2016 dropped to just $ 7,201. In October this year, the figure is $ 6,198 per day. The revenue from crude oil tankers has not been much better either. At the beginning of November, we expected an VLCC to earn $ 12,806 per day. That is less than half of what it took to become uniform.
Similarly, on November 6, the revenue of Suezmax and Aframax was $ 6,890 per day and $ 4,728 per day, respectively. They was considerably below break-even levels. Less demand for oil products and crude oil is a natural consequence of the pandemic. Lockdowns, in particular, and travel restrictions – international and domestic – directly cut into demand. But some activities are also limited. Because rising case numbers eat into consumer confidence and a desire to travel.
In this regard, new lockdowns measures in the UK have had a rapid impact on the number of cars on the road. As a result, the demand for gasoline stops. This drop is still much smaller than spring lockdowns. Gasoline demand in the USA has also fallen slightly since the summer peak. But with 8.3 million barrels per day, it is still 65% higher than in April. After the number of flights and passengers increased during the summer, we are seeing a decrease again. Eurocontrol data show that on November 15, only 9,697 flights were made in European airspace. It had a 62.5% drop from 25,864 on the same day last year. Eurocontrol expects six million fewer flights in its airspace this year compared with last.
In contrast, the number of domestic flights in China has improved to almost pre-pandemic levels. But this is not a V-shaped recovery. Because the decline significantly outpaced the recovery. While the rest of the world is still stuck at home, 637 million people traveled to China during the week. Although a significant figure, it is still 18.5% lower than last year. China has been very active in buying crude oil in the second quarter of the year. In the first ten months of the year, China’s crude oil imports rose 10.6% to 458.6 mln tons.
In this regard, Russia is China’s largest source of crude oil imports. At present, imports this year have been 66.5 million tons. While in 2019, it was 63.6 million tons. This has reduced the demand for tanker shipping. Because a significant share of imports from Russia comes through pipelines or railways.
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Frequently Asked Questions
No, the tanker shipping industry will not benefit from the usual strong winter seasonal effect due to new lockdowns and the oil supply glut of Q2 impacting sea freight.
The pandemic has resulted in less demand for oil products and crude oil due to lockdowns and travel restrictions cutting into demand, as well as rising case numbers eating into consumer confidence and desire to travel.
No, oil product tankers are not profitable at current levels. For these daily rates to be profitable, they must cover both operational and financing costs, which is not currently happening.
New lockdown measures in the UK have had a rapid impact on the number of cars on the road, resulting in a drop in demand for gasoline.
Yes, China’s active buying of crude oil in the second quarter of the year has reduced the demand for tanker shipping since a significant share of imports from Russia comes through pipelines or railways.