Crude oil freight rates are likely to be squeezed by surging ship supply and a possible slowdown in the world economy despite growing oil trade, the International Energy Agency (IEA) said yesterday.
It said that although it was forecasting a rise in crude trade, implying higher seaborne trade and higher tonne-mile demand, freight rates would be capped by rising ship supply and potential risks to the world economy.
In its Medium-Term Oil Market Outlook, which looks five years ahead, it said rates faced 'genuine downside risk' from an expanding fleet.
'However, perhaps a greater threat to freight rates is the downside risk from oil market fundamentals. Demand dented by an economic downturn or by higher prices following underperforming supply could significantly undermine oil trade and tanker demand,' it said.
The IEA said there were more oil tankers on order today than at any time since the shipbuilding boom of the early 1970s, citing a world order book at 140 million tonnes of capacity compared with just 73million at the end of 2003. That implied tankers to be delivered by the end of 2010 equated to almost 38 per cent of existing fleet supply. High vessel earnings have kept tanker scrapping at a record lows over the last three years.
It said that although it was forecasting a rise in crude trade, implying higher seaborne trade and higher tonne-mile demand, freight rates would be capped by rising ship supply and potential risks to the world economy.
In its Medium-Term Oil Market Outlook, which looks five years ahead, it said rates faced 'genuine downside risk' from an expanding fleet.
'However, perhaps a greater threat to freight rates is the downside risk from oil market fundamentals. Demand dented by an economic downturn or by higher prices following underperforming supply could significantly undermine oil trade and tanker demand,' it said.
The IEA said there were more oil tankers on order today than at any time since the shipbuilding boom of the early 1970s, citing a world order book at 140 million tonnes of capacity compared with just 73million at the end of 2003. That implied tankers to be delivered by the end of 2010 equated to almost 38 per cent of existing fleet supply. High vessel earnings have kept tanker scrapping at a record lows over the last three years.