Crude tanker market to stay in doldrums.
A crude oil rally above $60 will not provide much comfort for the oil tanker market as weak global demand and a growing fleet of vessels will dog hopes of a recovery in seaborne freight rates.
The International Energy Agency (IEA), energy adviser to 28 industrialised countries, forecast this month that world oil demand this year will post the sharpest annual fall since 1981. Pledges by the Organization of the Petroleum Exporting Countries to cut production has also taken its toll. "With oil demand contracting this year and with a lot of the associated reduction in oil production coming from Opec countries which support seaborne crude trade, the tanker market is getting hit from both sides," said Tim Smith, shipping analyst with consultants Maritime Strategies International (MSI). Ship broker Lorentzen & Stemoco forecast average rates for Very Large Crude Carriers (VLCCs) -- among the biggest vessels in the world tanker fleet -- falling to $30,000 per day in 2009 from $90,000 on average last year. Rates for the benchmark shipping route from the Middle East Gulf to Japan have hit record lows in recent weeks. The overall Baltic Exchange dirty tanker index, a composite of various shipping routes for crude oil, also remains sluggish. "Volumes are down and unemployed ships are plentiful," said Erik Jensen, a shipping analyst with Lorentzen & Stemoco. "Around 90 vessels are expected to enter the Middle East Gulf during the next 30 days, a clearly bearish sign." Oil prices fell from record highs over $147 a barrel in July 2008 to a low of $32.40 in December, hit by recession. The IEA has said the recent rise in oil prices was due to sentiment rather than evidence of higher consumption. Growth in the number of vessels coming onstream is set to compound difficulties. "The outlook is quite grim at the moment," said Parul Bhambri, research manager with shipping consultants Drewry. "There is really not too much incremental demand to support the tanker supply."
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