oil tanker market outlook - intertanko tanker market outlook –april 2017 © maritime strategies...
TRANSCRIPT
The Tanker Market Cycle – Evolution and Outlook
Intertanko HMP - April 2017
Tim Smith – Senior Analyst
+ 44 (0)207 940 0078
© Maritime Strategies International www.msiltd.com2
Agenda:
1. Understanding the tanker market cycle
2. Key drivers of tanker market fundamentals
3. Policy and price: geopolitical risks and scenarios
MSI Tanker Market Outlook – April 2017
© Maritime Strategies International www.msiltd.com3
1. Understanding the tanker market cycle
MSI Tanker Market Outlook – April 2017
Tanker Spot Earnings Indices
© Maritime Strategies International www.msiltd.com4
• Tanker spot markets, represented by composite indices, have been trending downwards since the start of 2016
• Some stabilisation from lows seen in Q3 16 but conditions remain poor
*MR Europe-US, LR1 ME-Japan
**VLCC ME-Japan, Suezmax W. Africa-Europe, Aframax Med.-Med.-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Jan
-12
Mar-
12
May-1
2
Ju
l-12
Sep
-12
No
v-1
2
Jan
-13
Mar-
13
May-1
3
Ju
l-13
Sep
-13
No
v-1
3
Jan
-14
Mar-
14
May-1
4
Ju
l-14
Sep
-14
No
v-1
4
Jan
-15
Mar-
15
May-1
5
Ju
l-15
Sep
-15
No
v-1
5
Jan
-16
Mar-
16
May-1
6
Ju
l-16
Sep
-16
No
v-1
6
Jan
-17
Mar-
17
Index Jan 15 = 1
Products Index* Crude Index**
1 Yr T/C Rates – Long-Term History
© Maritime Strategies International www.msiltd.com5
• The tanker market typically moves together
• 1 Yr T/C rates across a wide range of segments are highly synchronised
0
10
20
30
40
50
60
70
80
90
100
Q1 9
5
Q4 9
5
Q3 9
6
Q2 9
7
Q1 9
8
Q4 9
8
Q3 9
9
Q2 0
0
Q1 0
1
Q4 0
1
Q3 0
2
Q2 0
3
Q1 0
4
Q4 0
4
Q3 0
5
Q2 0
6
Q1 0
7
Q4 0
7
Q3 0
8
Q2 0
9
Q1 1
0
Q4 1
0
Q3 1
1
Q2 1
2
Q1 1
3
Q4 1
3
Q3 1
4
Q2 1
5
Q1 1
6
Q4 1
6
Q3 1
7
Q2 1
8
$ k/Day
MR LR2
Suezmax VLCC
VLCC Contracting and Earnings
© Maritime Strategies International www.msiltd.com6
• Smoothing both VLCC contracting and T/C earnings as 3-year moving average shows the long-term link between freight market conditions and tanker ordering
• This relationship contributes to the cyclical nature of the tanker market
0
5
10
15
20
25
30
5
15
25
35
45
55
65
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Mn Dwt$ k/Day
VLCC 1 Yr T/C VLCC Contracting (RH Axis)
OPEC ME/WAf Production vs. VLCC 1 Yr T/C Rates
© Maritime Strategies International www.msiltd.com7
• Green lines show positive correlation between VLCC market and OPEC production
• Red arrows show contraction in rates, typically accompanied by pressure from the fleet
0
10
20
30
40
50
60
70
80
90
100
18 19 20 21 22 23 24 25 26 27 28
$ k/Day
Mn b/d
1997-2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
© Maritime Strategies International www.msiltd.com8
2. Key drivers of tanker market fundamentals
MSI Tanker Market Webinar – March 2017
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
-30
-20
-10
0
10
20
30
40
50
60
70
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Mn Dwt
Deletions Deliveries End of Year Fleet Growth (RH Axis)
Fleet – Net Changes and Growth
© Maritime Strategies International www.msiltd.com9
• 10+ K Dwt tanker fleet (includes crude and products) seeing strong rate of growth
• Driven by high delivery levels, whilst scrapping increase not guaranteed
Fleet Growth by Segment (Year Avg. Capacity)
© Maritime Strategies International www.msiltd.com10
• Tanker fleet growth is being driven by large vessels in both crude and products sectors
• LR1/2 fleet averaging close to 9% growth for 2-3 years, Suezmaxes well above average
-2%
0%
2%
4%
6%
8%
10%
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
VLCC Suezmax LR1/2 Other Total (10+ k Dwt) Average
Oil Consumption and Price
© Maritime Strategies International www.msiltd.com11
• Oil price under sustained pressure, world has recalibrated to much lower price range
• Oil consumption growth stable and positive, but subject to macro and price shocks
0
20
40
60
80
100
120
140
-2
-1
0
1
2
3
4
5
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$/bbl%
World Oil Consumption Growth Oil Price (MSI Basket, RH Axis)
Refinery Capacity Expansion
© Maritime Strategies International www.msiltd.com12
• Asia and Middle East dominate incremental growth in refinery capacity expansion
• Further consolidation could occur in OECD regions, potentially accentuated by IMO sulphur regulations
-60
-40
-20
0
20
40
60
80
100
120
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
MnTpa
China Asia excl. China Middle East+Africa Europe+FSU Americas
OPEC Cuts
© Maritime Strategies International www.msiltd.com13
• OPEC agreed in November to cut 1.2 Mn b/d of production in the first half of 2017
• This was the first agreement to cut production since the wake of the global financial crisis in 2008
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
Ja
n-1
6
Fe
b-1
6
Ma
r-1
6
Ap
r-16
Ma
y-1
6
Ju
n-1
6
Ju
l-1
6
Au
g-1
6
Se
p-1
6
Oc
t-1
6
No
v-1
6
De
c-1
6
Jan
-17
Fe
b-1
7
Mn b/d
Africa, Latin America Middle East
Crude Imports – Incremental Change
© Maritime Strategies International www.msiltd.com14
• China remains key driver for crude trade growth but import expansion slowing
• Other regions such as Europe and US expected to act as a drag on crude imports
-100
-50
0
50
100
150
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
MnTpa (yoy Change)
China Asia excl. China
Europe Americas
Other
Products Imports – Incremental Change
© Maritime Strategies International www.msiltd.com15
• Product imports more diverse than crude – less reliant on Asia
• Asia still very important but diesel imports into Europe play a large role in underpinning the market
-40
-30
-20
-10
0
10
20
30
40
50
60
70
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
MnTpa (yoy Change)
Other Asia Europe Americas
Oil Trade Growth
© Maritime Strategies International www.msiltd.com16
• Crude and products trade growth appear to have realigned and decelerated after the sharp upturn in 2015
• MSI positive on outlook for next 2-3 years
-4
-3
-2
-1
0
1
2
3
4
5
6
7
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
% Growth
Seaborne Crude Cargo Seaborne Products Cargo
Tanker Supply, Demand and Employment Rate
© Maritime Strategies International www.msiltd.com17
• Tanker market is being driven down by high rates of fleet growth and relatively muted demand.
• These conditions reverse those seen in 2014/15, generating a volatile cycle over the last 2-3 years
86
87
88
89
90
91
92
93
94
95
0
1
2
3
4
5
6
7
8
9
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
%%
Supply Demand Employment Rate(RH Axis)
Tanker 1 Yr T/C Rate Forecast
© Maritime Strategies International www.msiltd.com18
• The market employment rate drives MSI’s freight rate forecast, shown as 1 Yr T/C
• We expect 2017 to be the nadir of the market with a sustained recovery beginning in 2018
0
10
20
30
40
50
60
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ k/Day
MR LR1 Suezmax VLCC
Aframax Tanker Earnings and Prices
© Maritime Strategies International www.msiltd.com19
• Newbuilding prices are moving towards an anticipated trough in 2017
• Pressure on asset prices coming from both the newbuild and freight markets
0
5
10
15
20
25
30
35
40
45
0
10
20
30
40
50
60
70
80
90
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ k/Day$ Mn
Newbuild 5 Yr Old 10 Yr Old 1-Yr T/C Rate (RH Axis)
Trough to Trough: 2013-2017 Relative Change
© Maritime Strategies International www.msiltd.com20
• Looking at the ‘trough-to-trough’ performance across a range of sizes for earning and asset prices
• Crude tankers have arguably seen less pressure from freight market environment
-20%
-10%
0%
10%
20%
30%
40%
MR
LR
1
Su
ezm
ax
VL
CC
Newbuild 5 Yr Old 1 Yr T/C
© Maritime Strategies International www.msiltd.com21
3. Policy and price: geopolitical risks and scenarios
MSI Tanker Market Webinar – March 2017
Enhanced OPEC Cut Scenario
© Maritime Strategies International www.msiltd.com22
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
Ja
n-1
6
Fe
b-1
6
Ma
r-1
6
Ap
r-1
6
Ma
y-1
6
Ju
n-1
6
Ju
l-1
6
Au
g-1
6
Se
p-1
6
Oc
t-1
6
No
v-1
6
De
c-1
6
Ja
n-1
7
Fe
b-1
7
Mn b/d
Africa, Latin America Middle East
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
30
50
70
90
110
130
150
2012
2013
2014
2015
2016
2017
2018
$/bbl
Oil Price Base CaseOil Price ScenarioWorld Oil Consumption Growth Base Case (RH Axis)World Oil Consumption Growth Scenario (RH Axis)
0
5
10
15
20
25
30
35
40
45
50
2012
2013
2014
2015
2016
2017
2018
$ k/Day
LR2 Base Case
LR2 Scenario
VLCC Base Case
VLCC Scenario
-30
-20
-10
0
10
20
30
US
Ba
se C
as
e
ME
Ba
se
Ca
se
US
Sc
en
ari
o
ME
Sc
en
ari
oMnTpa
2017 2018
1. 2.
3. 4.
0
200
400
600
800
1000
1200
1400
1600
1800
0
20
40
60
80
100
120
140
Ja
n-1
2
Ma
r-1
2
Ma
y-1
2
Ju
l-1
2
Se
p-1
2
No
v-1
2
Ja
n-1
3
Ma
r-1
3
Ma
y-1
3
Ju
l-1
3
Se
p-1
3
No
v-1
3
Ja
n-1
4
Ma
r-1
4
Ma
y-1
4
Ju
l-1
4
Se
p-1
4
No
v-1
4
Ja
n-1
5
Ma
r-1
5
Ma
y-1
5
Ju
l-1
5
Se
p-1
5
No
v-1
5
Ja
n-1
6
Ma
r-1
6
Ma
y-1
6
Ju
l-1
6
Se
p-1
6
No
v-1
6
Ja
n-1
7
# Rigs$ k/Day
Brent
WTI
Total US Oil Rig Count (RH Axis)
0
50
100
150
200
250
300
350
400
450
500
400
450
500
550
600
650
700
750
800
850
900
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
MnTpaMnTpa
US+Canada Crude Oil Production
US+Canada Crude Exports (RH Axis)
0
2
4
6
8
10
12
Imports Exports
Mn b/d
Products Crude
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Can
ad
a
Sau
di
Ara
bia
Ven
ezu
ela
Mexic
o
Co
lom
bia
Iraq
Ecu
ad
or
Nig
eri
a
Ku
wait
An
go
la
Mn b/d
US Oil Production – Trump, Drilling and Exports
© Maritime Strategies International www.msiltd.com23
1. 2.
3. 4.
0
100
200
300
400
500
600
700
0
10
20
30
40
50
60
70
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
$/T$ k/Day Vessel
Earnings
Containership (1.1 k TEU)
Dry Bulk Carrier (75 k Dwt)
Crude Oil Tanker (Aframax)
HFO Bunkers (RH Axis)
0
200
400
600
800
1000
1200
1400
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Jan
-12
Jan
-13
Jan
-14
Jan
-15
Jan
-16
Jan
-17
Jan
-18
Jan
-19
Jan
-20
$/T
HFO 380 MGO Brent
-15
-10
-5
0
5
10
15
20
25
30
2015
2016
2017
2018
2019
2020
2021
MnTpa
US+Canada Latin America Europe Africa Asia excl. China
0
10
20
30
40
50
60
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
$ k/Day
LR2 Base Case LR2 Scenario
VLCC Base Case VLCC Scenario
Bunker Fuel Regulations
© Maritime Strategies International www.msiltd.com24
1. 2.
3. 4.
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