The crude tanker fleet, like most ‘volume’ shipping sectors, has endured major overcapacity since the start of the downturn in 2008. This pressure has owners searching for positivity in both the supply and demand side of the market.

A Heavy Burden
The supply side outlook for crude tanker owners remains mixed. As shown in the Graph of the Month, there remains a substantial amount of crude tanker tonnage to be delivered in the next two years. Currently, 8.1m dwt of VLCC, Suezmax and crude Aframaxes have been delivered this year, with 30.5m dwt scheduled to be delivered by the end of 2014. A total of 25.2m dwt has been and is scheduled to be delivered in 2013, only slightly less than the 25.4m dwt delivered in 2012. As a result, the crude tanker fleet is projected to expand 4.3% y-o-y in 2013, while crude tanker deadweight demand is projected to grow 2.2%, widening the differential between supply and demand for another year.

Not All Bad
Consequently, there are likely to remain supply pressures for owners through 2013. However, when placed in a historical context, owners may begin to see some light at the end of the tunnel. Even before accounting for slippage, scheduled deliveries in 2013 are scheduled to fall to their lowest level since 2008. Crude Aframax deliveries are scheduled to reach their lowest level since 2001, with the active crude Aframax fleet projected to decline 1.9% y-o-y in full year 2013. Furthermore, the orderbook by dwt as a percentage of the fleet has fallen in each of the three sectors, as shown on the graph. By dwt, the orderbook at the start of 2013 represented 13% of the combined VLCC, Suezmax and Aframax crude fleets, with the Aframax crude tanker orderbook representing only 7% the fleet. Looking ahead to 2014, crude tanker delivery volumes are likely to ease, with scheduled deliveries declining 47.2% y-o-y. These factors, coupled with a gradually improving outlook for the global economy, and seaborne crude trade volumes, are likely to improve the balance between demand growth and supply growth in 2014.

The Future (Could Be) Brighter
The longer term outlook may offer further positivity for owners, as the orderbook delivery schedule in 2006 had a very different shape to the current outlook. Delivery volumes of crude tankers in 2015 and 2016 are currently scheduled at 4.2m dwt and 0.8m dwt respectively. Even allowing for slippage and some further contracting in the interim, it seems likely that supply growth will slow in this period. By contrast, at the start of the contracting boom, scheduled deliveries was 43.3% higher y-o-y in 2007 and 4.4% higher in 2008, compared to the schedule for 2006.
Ultimately, there are currently two sides to the narrative of crude tanker supply. On one hand, there remains a large amount of tonnage to be delivered in 2013, which will add to the oversupply problems for owners. On the other, the medium-term outlook for deliveries seems more positive than it has been for owners since the start of the recession. Tentatively, crude tanker owners may begin to hope for a brighter tomorrow, on the supply side at least!