Tanker rates
In early 2022, coronavirus lockdowns in China caused the fall of freight rates in the tanker segment. The conflict in Ukraine triggered the roaring demand for oil that could substitute supplies from Russia and a simultaneous growth of bunker prices. Analysts forecast further increase of the demand for tankers this year, particularly due to shifting of Russian oil exports from Europe to China.
From 24 February 2022 to date, oil price has increased by 20%, average bunker price – 1.5 times. That resulted from the ban of the USA and the UK on oil imports from Russia and from EU countries’ threats to reject Russian oil. It should be noted that in 2021, the USA alone imported almost 700 thousand barrels of crude oil and oil products per day.
Crude oil and oil products users, in their turn, started looking actively for alternative supplies, hence the growth of the demand for tanker shipping. In the beginning of the year, freight rates in the tanker market were very low or even entered the negative zone (in the segment of VLCC). According to Mitsui OSK Lines (MOL) referring to Clarksons Research, freight rates for VLCC (bound to Japan) used to fall to -$10,000 per day in January-February and surged to $2,500 per day after February 24. A sharp increase was also registered in the segment of product tankers: MR freight rates rose from below $5,000 per day to over $7,500 per day, LR freight rates – about $1 per day to almost $2,000 per day.
Analysts also mark a fast growth of freight rates for tankers carrying crude oil from Houston to Rotterdam, from Africa to UK, from the Middle East to China and Japan which speaks for an urgent search of alternatives to supplies from Russia. Reportedly, independent refineries in China also tend not to use Russian oil so far.
Meanwhile, Aframax ships operating in the Mediterranean basin, war risk premiums are introduced.
That is also affected by the growth of bunker prices which also leads to the increase of freight rates.
On the other hand, the coronavirus pandemic is still an essential factor pressing the demand. Expansion of the omicron variant in China caused suspension of some manufactures’ activities and transportation between some areas.
"We are downward adjusting our demand estimation for China while observing the pandemic situation and the government's corresponding measures," said Sun Jianan, an analyst with S&P Global Commodity Insights' Platts Analytics.
Analysts from Beijing, Shenzhen and Guangzhou agree with the lower demand forecast. Some of them expect about a 4-pct reduction of oil product demand versus their initial outlook.
Apart from jet fuel, lockdowns are expected to reduce gasoil demand for shipping industrial products and gasoline for urban transportation.
China is expected to gradually ease coronavirus restrictions throughout the year to facilitate economic growth as omicron lethality rate is less compared to the delta variant.
In general, analysts expect tanker freight rates to stay relatively high in 2022.
“This is on the back of a very strong price stimulus because China may import more crude this year and Iran may re-enter the export markets if it comes to an agreement with the United States on its nuclear programme, - comments CGS-CIMB Research. - This is also on the likelihood of Russian crude oil exports being diverted to China from Europe, thereby raising annual tonne-mile demand for tankers for the first time after three consecutive annual declines.”
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