In its latest weekly report, shipbroker Gibson said that “the tanker market remained challenging with freight rates under pressure from a constant barrage of tanker supply, while the demand side was impacted by OPEC’s crude decision to implement production cuts which also impacted in a lack of arbitrage opportunities. One of the few exceptions to the bearish picture was the spike in rates witnessed as a result the surge in demand on Continent-USAC (TC2) route following the outage of US refining capability in the wake of Hurricane Harvey. This spike was short lived and quickly reverted to previous levels. Since June, the Brent oil price has risen by around $20/barrel which has had more of an impact on owners earnings. However, unfortunately the supply and demand balance is still some way off particularly given the wave of newbuilding added to the existing orderbook”, Gibson noted.

According to the shipbroker, “ordering activity was already brisk even before Trafigura announced in June their intension to order initially 22 newbuild crude and product carriers placed through Asian partners and leased back to with purchase options. Of course, this is only part of the story, attractive newbuilding prices still continue to tempt owners into ordering across all tanker sectors despite challenging freight markets. The tanker orderbook surpassed 200 by early December with firm numbers for VLCC orders representing more than 27 per-cent of the final total. Aframax/LR2 also showed similar numbers while there was steady ordering of MRs throughout the year. We are also aware of many owners who have indicated their interest in adding to these numbers either as replacement tonnage or speculative asset plays. Second-hand asset prices also continued to be pressed down with tonnage older than 10 years registering the biggest decline. Charterers have plenty of younger units to ‘cherry pick’ heaping more pressure on the older tonnage to find employment. This is clearly demonstrated by the unwinding of VLCC floating storage in the secondhalf of the year resulting in an increase of older units finding it difficult to get back into conventional trade”.

Meanwhile, Gibson added that “impending legislation became a major talking point during the year. A sigh of relief was almost audible as the IMO bowed to pressure amending the BWM Convention by delaying implementation of the requirements for a further two years for most owners. However, the major concern for all shipowners is the rapidly approaching 0.5% sulphur fuel limits effective from January 2020. The IMO, under pressure to fulfil the Paris climate change accord, have stated several times that there will be no movement on this legislation and owners have little choice but to comply, the real issue is what the cost of compliance will be? Tanker market earnings have had more of an influence of scrap levels. However, the closer we get to 2020 compliance with these two items of legislation coupled with vessel age, will be the main drivers for higher scrapping levels going forward”.

The shipbroker also noted that “in January 2017 we witnessed the inauguration of a new US President who entered the White House on a policy of “putting America first” and in particular, providing energy security as well as providing jobs for American workers, a major part of the Trump election campaign; meaning less dependence on crude imports. US dependence on crude imports had in fact been diminishing long before Trump entered the Oval office, but we have witnessed US shale oil exports reaching an all time high of 2 million b/d in October. However, US policy on a number of political issues may have a major impact on the tanker market in 2018. The issue of Iranian sanctions was put back on the agenda by the administration, while the thorny issue of North Korea still hangs like the “Sword of Damocles” poised to fall. Events in Venezuela also present a major concern to the tanker market”.

“The year ends with the announcement of the merger of Euronav with Gener8 (still to be ratified) which may be an early sign of more such partnerships in 2018. For sure next year will be full of challenges for the tanker market and not just from a supply and demand perspective. However, global politics may also play a significant role on how quickly the tanker market will get back on its feet”, Gibson concluded.