“Struggles in the VLCC sector would be compounded if OPEC heeds the IEA’s call to trim output, an analyst has warned. The benchmark Gulf/Far East route inched up by 0.15 points yesterday from a 2012 low of Worldscale 33.73, to average -$3,899 per day. The ailing market is caused by backwardation in the oil market, as traders are loathe to move cargoes in these conditions. Importers are also not in a hurry to secure cargoes because of aggressive stockpiling in 1H12, when the 1.7 M barrels per day average stock build added 300M tonnes of cargo, mostly in the form of exaggerated OPEC production flowing from the Gulf to Asian ports. This situation has led Poten & Partners to observe: ‘Aggressive OPEC output levels that averaged 31.58M bpd during 1H12 provided implied global stock builds of 1.3M bpd and 2.1M bpd in 1Q12 and 2Q12, respectively, in response to growing market anxiety over Iranian sanctions.’ While the International Energy Agency has called for OPEC crude output to average 30.5M barrels/day for 2011-13 – as weaker oil demand growth has allowed resurgent non-OPEC production to keep pace – Poten warned that this would not help the tanker market. ‘A static call on OPEC crude is hardly supportive for the tanker market, particularly with the cartel currently producing more than 1M bpd above this level,’ it cautioned. ‘OECD oil inventories are now at more comfortable levels, but as much as 85% of the implied stock build seems to have occurred in non-OECD nations, with China’s rising strategic reserve being a leading component.’ The implications for Gulf crude exports and VLCCs could be challenging, given modest year on year gains in OPEC output in Libya and Angola expected for 2013, it added. A 800,000bpd decline in OPEC production might imply a 950,000bpd cut in Middle Eastern output, removing at least 2.5% from crude tanker demand, predominantly for VLCCs. The anticipated start-up of the 400,000bpd Total joint venture refinery in Jubail during 2013 could amplify this effect, Poten warned, by further limiting crude export availability. STRUGGLES in the VLCC sector would be compounded if OPEC heeds the IEA’s call to trim output, an analyst has warned.”
