Crude Summit: Crude tanker market remains oversupplied

Crude tanker earnings are unlikely to eclipse pre-pandemic levels in 2022 as the market is expected to remain oversupplied, freight market participants said today at the Argus Americas Crude Summit in Houston, Texas.

"The outlook is extremely poor," Trafigura's Global Head of Oil Chartering Andrea Olivi said.

The global very large crude carrier (VLCC) fleet grew by 61 vessels to 830 over the past two years, and another 42 are expected to be delivered, according to Conor Stone, product specialist at Vortexa. This increased capacity is not expected to be met by a proportional rise in crude export demand, Stone said, which will put further downward pressure on freight rates.

Global tonne-mile demand remains below pre-pandemic levels, despite a recovery in total export volumes, according to Mikkel Seidelin, director of chartering & freight trading at Teekay Tankers.

Shipowner earnings have also faced downward pressure from increased fuel prices, which have supported freight rates but narrowed shipowner margins, Seidelin said.

A jump in scrapping of older tonnage will be needed in order for freight rates to rise in the near term, Olivi, Seidelin and Stone agreed. But Olivi noted that "forward optimism" among shipowners has delayed scrapping, contributing to the oversupply of the market.

Stone expects it will take roughly two or three years before the market "rebalances" and cruder tanker owner earnings return to pre-pandemic levels.

"The recovery is coming" Stone said, "just not this year."

By Michael Connolly