China's emergence as one of the leading economies worldwide, undoubtedly marked its increased impact on the shipping markets, with tanker industry also being affected by the world's second biggest economy's slowdown. Over the past three years alone, Chinese crude imports have increased on average by around 0.51 million b/d per annum. In its latest report, Gibson noted that a slowdown in crude trade growth during 2011 had an adverse effect on the tanker markets as well. "Imports rose by just 0.31 million b/d on the back of moderating economic growth and slowing refining capacity expansion. More than the net gain came from the Middle East producers, with volume from the region up by 0.37 million b/d year-on-year. However, long haul crude imports from Africa actually declined by 0.2 million b/d in 2011, as more light sweet West African crude was “pulled” into Europe to compensate for the loss of Libyan barrels" said Gibson.
It went on to estimate that "this year the expectations are for an even smaller increase in Chinese crude imports. The research unit of China National Petroleum Corp forecasts an annual growth of just 0.25 million b/d, although around 0.8 million b/d of refining capacity is scheduled to come on stream over the course of 2012 (some of which may slip into 2013).
For tanker markets, rapidly recovering Libyan crude oil production is likely to lead to stronger crude tonne mile demand into China. The rebound in Libyan crude production is easing supply pressures on European refiners, making more African crude available for eastern buyers. At the same time, the geopolitical tensions in Iran, Sudan and Yemen could lead to less crude oil exported from these countries to China. These “lost” barrels will have to be replaced, possibly from further afield, pushing tanker tonne mile demand even higher. Last, but not least, there is also a possibility of higher crude imports due to strategic storage developments, more specifically the 2nd phase of the Strategic Petroleum Reserve (SPR). Although the Chinese authorities are still to release detailed information, the indications are that the reserve capacity during this phase could increase by 169 million bbls. Media reports suggest that close to 79 million bbls of storage facilities have already been constructed and are ready to be filled or are due to be completed soon. If these 79 million bbls facilities are filled evenly in 2012, this would imply an increase of 0.22 million b/d in crude import requirements. However, the IEA warns that buying decisions are likely to depend on prevailing market conditions, such as the level of oil prices. Therefore, the pace of filling the reserve is expected to be more erratic and for tankers it is likely to translate into greater volatility" says Gibson.
The London-based shipbroker concludes that "combined, the above developments suggest that the actual crude tanker demand into China in 2012 is likely to be stronger than the base case forecasts would indicate. Yet, this may still not be enough for tanker owners this year. Nonetheless, the further expansion in Chinese refining capacity and the filling of the SPR could mean a return to stronger growth in crude imports over the next couple of years" stated Gibson.
Meanwhile, in its outlook for the tanker markets, Teekay Coproration, said during its release of financial results, that "crude tanker rates strengthened during the fourth quarter of 2011 due to seasonal factors and an increase in global oil production to record highs. In the Atlantic, weather in the North Sea and Baltic Sea and transit delays through the Turkish Straits led to an increase in European Aframax and Suezmax rates. The return of Libyan oil production to approximately 1.0 million barrels per day (mb/d) by the end of the year also provided support to tanker rates in the Mediterranean. In the Pacific, an increase in Asian oil imports to meet peak winter demand caused rates to firm up, particularly in the large crude oil tanker sectors. Weather disruptions in the Atlantic have continued to give support to crude tanker rates in early 2012.
The tanker fleet grew by 26.1 million deadweight tonnes (mdwt), or 5.8 percent, during 2011, compared to an increase of 17.7 mdwt, or 4.1 percent, during 2010. A total of 39.6 mdwt of new tankers entered the fleet in 2011, a decrease from 41.5 mdwt in the previous year. A total of 13.6 mdwt of tankers were removed for scrapping or conversion during 2011, a decrease from 23.8 mdwt in 2010. Approximately 50 mdwt of tankers are scheduled for delivery during 2012; however, we anticipate an order book slippage rate of around 33 percent due to construction delays and order cancellations and estimate actual deliveries of approximately 33.5 mdwt. Assuming scrapping of 12 mdwt occurs, the Company estimates that the tanker fleet will grow by approximately 21.5 mdwt, or 4.5 percent, during 2012.
Based on the average range of forecasts from the International Energy Agency (IEA), the Energy Information Agency (EIA) and the Organization of Petroleum Exporting Countries (OPEC), global oil demand is expected to grow by 1.0 mb/d in 2012, with growth expected to be driven entirely by non-OECD regions. This increase in oil demand is expected to increase demand for tankers through 2012. In addition, the Company anticipates that average voyage distances will lengthen during 2012 due to a narrowing in the price spread between crude oil produced in the Atlantic - such as Brent - and Middle Eastern grades, which makes Atlantic basin crude more attractive to Asian buyers.
With tanker supply growth expected to exceed demand growth for at least the first half of 2012, the current seasonal strength is expected to give way to spot tanker rate weakness and volatility similar to that experienced in 2011. These conditions are expected to persist through much of 2012 before an anticipated reduction in tanker supply growth begins to provide support for potentially stronger rates in the latter part of the year" concluded Teekay.