Tanker owners might want to start considering taking time-charter coverage as risks to the strengthening tanker market abound, Gibson Shipbrokers said on Friday.
In its weekly note, the broker argued that while vessel supply tightness is a certainty going forward, there were still questions around things like oil demand, Opec+ supply and the global economic outlook.
“The outlook for the tanker market has never been so uncertain,” Gibson said.
“If the economic turmoil does spiral out of control and sanctions against Russia are repealed, then the outlook could look very different. Perhaps taking longer-term time-charter coverage sooner, rather than later might be the optimal strategy for owners.”
The broker said that while rates and sentiment in the market are strong, tankers do not always perform well in times of economic downturns.
Gibson said owners are relying on China and India to support oil demand as developed countries have been slow to pick theirs up, while hoping European Union sanctions on Russia stay in place to continue the trading pattern shuffle that has elongated voyages.
Meanwhile, Opec+ could announce a production cut, Gibson said. The group is falling short of production by 3.4m barrels per day, it said, but deeper cuts could be more than symbolic and impact VLCC rates.
Tanker owners also have to look out for a strengthen dollar, winding down of US strategic petroleum reserve releases, Chinese export quotas and the US sanctions regime on Iran and Venezuela.
“However, amongst all this uncertainty, one thing is certain — vessel supply,” Gibson said. ”Tanker fleet growth is slowing and very few yard slots remain available before 2025. The fleet is ageing and IMO regulations will reduce the trading capacity of the fleet.
“These factors suggest that the tanker market might better navigate a weaker demand environment than previous downturns, when weak demand typically coincided with a period of higher supply growth.”
Should tanker owners take Gibson’s advice on time chartering their vessels, they would be doing so into a strengthening market for some asset classes.
According to data from Howe Robinson Partners, VLCCs on a 12-month charter were earning $42,500 per day up $7,500 from the start of the month and $30,000 per day on a three-year charter, a rise of $4,000 over the same period.
One-year charter rates for LR2s jumped $6,000 to $38,000 per day and $3,500 to $28,500 per day on three-year deals during September, the shipbroker said.
Meanwhile, suezmax and aframax one-year time charters fell, but three-year agreements saw suezmaxes add $1,000 to $28,500 per day and aframaxes $500 to $28,000 per day.
LR1s remained flat at $28,000 per day for 1-year and $19,000 per day for three-year time charters, while MRs rise $1,500 to $27,500 per day on a one-year charter and $2,500 to $21,000 per day for a three-year.
