General Comments on the Market
Crude tanker freight rates strengthened considerably in early Dec’07 rising to the highest levels since the record highs of late 2004 (and in the case of the VLCC market eclipsing those levels). The key drivers behind the rebound in rates were low global oil stocks going into winter, increased refinery throughput following a heavy autumn maintenance schedule, a 0.5 mb/d increase in OPEC oil supply from 1st Nov’07 and completion of field maintenance at a major oilfield in the Middle East. Seasonal factors such as fog related delays in the US Gulf and rising transit delays in the Bosphorus straits helped tighten the tanker supply / demand balance even further.
Tanker sales for conversion (particularly for conversion to dry bulk carriers) continued to rise through Q4-07 across all the major tanker segments (i.e. VLCC, Suezmax, Aframax). The removal of these vessels from the tanker fleet has the effect of dampening tanker supply growth.
In its Jan’08 report the IEA recorded 2007 average global oil demand of 85.8 mb/d (1.0 mb/d or 1.2% higher than 2006). For 2008 the IEA is estimating global oil demand to average 87.8 mb/d (2.0 mb/d or 2.3% higher than 2007), led by demand growth in non-OECD countries such as China and the Middle East nations and an increase in heating oil demand brought about by a return to normal weather patterns.
| Overview (Preliminary Statistics) | Q4-07
(mb/d) | Q3-07
(mb/d) | Change | Main Factors |
| Global Oil Demand | 87.2 | 85.4 | 
| • Q4-07 average global oil demand rose by 1.8 mb/d over Q3-07 and by 1.5 mb/d (or 1.8%) year-on-year with the onset of winter in the northern hemisphere. |
| Global Oil Production | 86.5 | 85.1 |
| • Global oil supply rebounded in Q4-07 as several oil fields came back from summer maintenance and as OPEC raised output from 1 st Nov’07 by 0.5 mb/d. • Global supply in Q4-07 was 1.0 mb/d higher year-on-year having averaged at or below levels of one year ago for the previous three quarters of 2007.
|
OPEC Oil Production
(including Angola & Ecuador)
| 36.7 | 35.9 |
| • OPEC production rose by 0.8 mb/d over Q3-07 due to an increase in output of 0.5 mb/d from 1st Nov’07 and restored UAE production following a period of oil field maintenance. |
| Spot Market | Q4-07
($ per day) | Q3-07
($ per day) | Change | Main Factors |
| VLCC | 96,000
| 30,000
|
| • VLCC average earnings peaked at a new record of USD 230,000/day in Dec’07 due to increased OPEC output from the Middle East and strong demand from US and Asian refiners. |
| Suezmax | 61,000 | 22,000 |
| • Strength in the VLCC market during Dec’07 filtered down the size ranges with Suezmax spot earnings averaging over USD 100,000/day for the first time since Nov’04. |
| Aframax | 41,000 | 23,000 |
| • Winter transit delays in the Bosphorus and fog-related delays in the US Gulf tightened the Aframax supply / demand balance and led to an increase in rates. |
| LR 2 Tankers | 22,000 | 22,000 |
| • An uptick in demand from Asia during Dec’07 prevented a decline in LR2 tanker rates.
|
| MR Tankers | 22,000 | 18,000 |
| • MR rates were supported by the opening of Trans Atlantic arbitrage opportunities (gasoline from UKC to US and diesel from US Gulf to Europe). |
Small Tankers
(8,000 - 15,000 dwt) | 14,500 | 12,000 |
| • Weather related delays at ports in Northwest Europe coupled with an increase in Baltic naphtha export volumes helped lift intermediate tanker rates. |
| Fleet (Preliminary Statistics)
| End Q4-07
(mdwt)
| End
Q3-07
(mdwt) | Change | Main Factors |
| World Tanker Fleet | 395.0 | 391.7 |
| • Preliminary figures show that the tanker fleet grew by 22.2 mdwt (or 5.9%) in 2007, a similar level of fleet growth to 2006. |
| Deliveries | 6.5
| 7.8
|
| • 30.2 mdwt of tankers were delivered in 2007, an increase of 4.2 mdwt over 2006. |
| Deletions | 3.2
| 2.3
|
| • 8.9 mdwt of deletions were recorded in 2007, of which 3.0 mdwt was scrapping and 5.9 mdwt conversions. An uptick in conversions during 2007 was led by dry bulk and supported by FPSO conversions. |
| Newbuilding Orders | 7.2 | 9.9
|
| • Following a record 84.5 mdwt of tanker orders in 2006 the level of ordering in 2007 fell by ~48% to 43.6 mdwt. The level of new orders across other ship types remained strong with a large uptick in dry bulk ordering recorded during 2007. |
| Orderbook | 158.0 | 157.2 |
| • The end-2007 tanker orderbook of 158.0 mdwt represents 40% of the existing fleet. Newbuilding delivery lead times are now at record highs. |
Time-Charter Market
After an active Oct’07 the volume of concluded time charter deals declined in Nov’07 and remained low in Dec’07. Although time charter rates remained relatively flat in Oct / Nov’07 owners’ rate ideas rose in Dec’07 on the back of stronger spot rates.
Oil traders continued to feature prominently in the products time charter market (MR / handysize units in particular). Time charter rates for product tankers remained relatively flat over Q4-07.
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| Legend | |
| OPEC | Organization of the Petroleum Exporting Countries |
| NB | Newbuilding |
| mb/d | Millions of barrels per day |
| VLCC | Very Large Crude Carrier |
| OECD | Organisation for Economic Co-operation and Development | |
| mdwt | Million Deadweight |
| MEG | Middle East Gulf |