What's Driving the Crude Tanker Industry in 2016?
Ton-mile demand
One of the most important factors in the crude tanker industry is the shift in trade routes. A longer route means a longer time for vessels and an increase in the ton-mile demand, which benefits companies like Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), and Euronav (EURN). In this article, we’ll look at the changing trade routes in the crude tanker industry.
VLCC routes
According to Poten and Partners, there was a significant increase in movements from the Arabian Gulf to the Red Sea. VLCC fixtures on this route increased almost five times from 12 in 2014 to 56 in 2015. According to the same report, India has shifted its purchases from the Middle East to West Africa. In 2015, India picked up its purchases of West African crude, which resulted in a 35% increase in VLCC spot fixtures compared to 2014. As West Africa increased exports to India, it reduced its exports to the Atlantic Basin. This shift benefits the ton-mile demand.
Suezmax routes
According to Poten and Partners, Suezmax activity in the Pacific has increased. Movements from Mexico to the Far East and Kozmino to Asia increased. According to IEA data, China became Russia’s biggest oil customer at the end of 2015. In an earlier series, we talked about how more Russian crude oil in China benefits the tanker industry.
Aframax routes
According to Poten and Partners, the situation in the Aframax market is less positive for crude tankers as compared to large vessels like VLCCs and Suezmaxs. The main Aframax market, the Caribbean market, saw fewer fixtures, as less crude oil was moved on short haul routes to the US and Europe. A bright spot for Aframax could be the growing crude oil exports from the US. In an earlier series, we talked about why smaller tankers will benefit more with US oil exports.
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