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Industry Opinions
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Well, Look at the Time
August 19, 2011 |
| Any guest at a cocktail party knows that it is rude to double dip, but this etiquette lesson must have been lost on the economy. The pervasive financial turmoil has been an unwelcome gate crasher in world markets for stocks and commodities, and is likely to put a damper on any near-term recovery of petroleum demand in the OECD economies. As freight rates are very strongly correlated with global petroleum demand, continued weakness from the world’s largest energy consumers is reasonable cause for alarm. In times like these, it may be helpful to look to the past for indication of how long we must endure this market’s insufferable company. |
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Show Us the Money, and We’ll Show You the Barrels
August 12, 2011 |
| Despite the generally steady refined product demand climate in the United States, it is interesting to note resurgence in refining activity. Over the course of the summer, the market on the East Coast of the United States (PADD I) has seen a marked increase in both structural refining capacity and crude oil throughput. It is curious that as capacity increases in a steady demand environment domestically, consumers of beleaguered retail gasoline consumers have seen little price relief. |
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Follow The Yellow Brick Road – US Debt Limit Revision
August 05, 2011 |
| Welcome to Oz! While it is nothing new, now more than ever it seems the United States government is making a sport of changing the rules of the game while it is in play. This week, the revision of the United States debt ceiling serves as the primary example. Perhaps it is simply the widespread news media coverage, but for once it seems that the American public is paying attention and even scrutinizing the decisions being made by our elected officials. One has to question the character of legislators deciding to revise rules and policies when it is convenient. In the case of the debt ceiling revision, changing the rules serves to delay an inevitable economic fate while saving face for those officials facing re-election. The hyper-dramatic tone employed by the Washington elected elite when cautioning the public about the cataclysmic result of not raising the debt limit was deceptive. |
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Land Down Under (July 29, 2011)
July 29, 2011 |
| Despite persistent weakness in most OECD economies, continued demand for Australia’s commodities, particularly from its rapidly developing Asian neighbors, has helped the country’s economy to rebound from the Great Recession much faster than its European and North American peers. Energy exports make up a significant portion of Australia’s GDP, and the country has continued to invest in developing these outbound resources. In the face of declining crude oil volumes, Australia has shifted attention to its more abundant hydrocarbons, namely, natural gas. Projects such as the $40 billion Gorgon LNG project are aimed at very literally fueling Australia’s GDP growth. But even as Australia’s focus shifts away from conventional crude oil production, there may be still be chances for tanker owners trading in Pacific markets to benefit from the country’s investments. |
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Treading Water (July 22, 2011)
July 22, 2011 |
| As we settle into the third quarter of 2011, outlooks for the health of the global economy have been erratic at best upon headlines out of control debts, stagnant growth, and rising unemployment in developed economies. Despite recent gains in stock market performance, the grim state of macroeconomic affairs does not inspire much investor optimism in European and American markets. Tanker owners have proven incredibly resourceful in getting by, however a look into the economics of vessel ownership suggests that creative solutions may soon be required to navigate the market’s choppy waters. |
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The Mid-Continental Divide (July 15, 2011)
July 15, 2011 |
| A recent pipeline spill into Montana’s Yellowstone River has added fuel to the fire surrounding the TransCanada Keystone pipeline expansion. Opponents to the project have been vocal on both sides of the American-Canadian border for various reasons, environmental concerns chief among them. Record high crude oil inventories at Cushing, Oklahoma and slack demand from American consumers, however, have called into question the real need for the pipeline expansion and the underlying motives of those angling for its completion, especially on the American side. True, oil prices are still relatively high, but not from lack of supply. American markets are awash in expensive crude oil, but adding more to the trough will not likely mitigate the price pressure anytime soon. |
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In-dia for the Long Haul (July 8, 2011)
July 08, 2011 |
The high crude oil price environment seen in 2011 has raised concern that inflationary pressure could interfere with the pace of global economic recovery. Some developing economies have attempted to control runaway inflation by limiting the price of fuel sold to domestic consumers, but just over a year ago, India began phasing out its subsidies for transportation fuels. The Finance Ministry acknowledged that the removal of subsidies would likely bring about an increase in inflation in the near term. However, this liberalization along with a tightening in quality has facilitated marketing to the United States and could increase demand for long range product tankers over the next few years.
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Uncle Sam's Slight of Hand (July 1, 2011)
July 01, 2011 |
| The move this week by President Obama and his administration to release Strategic Petroleum Reserve (SPR) crude oil should be seen as nothing more than a political stunt. Although an immediate short-fall in supplies worldwide was touted as the impetus, the decision to release more barrels from the SPR was more likely aimed at quieting oil prices than satiating short-term demand requirements. The tapping of 30 million emergency barrels raises questions about the motives, timing and most importantly, the accountability of the United States government with respect to oil policy and the use of the SPR as a tool to manipulate markets. |
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Yard Trips Sink Ships (June 24, 2011)
June 24, 2011 |
| Public companies, private equity groups and new entrants to the shipping markets convened at various finance conferences this week bringing both enthusiasm and raising valid questions about the long-term prognosis for recovery in tanker freight rates. Recent comments made to the press and Wall Street have created some cause for concern as well-established tanker shipping companies seem to appear somewhat cavalier about the oversupply situation. While we appreciate the confidence in the resilience of the market, tanker shipping companies should be cautioned that the overall demand climate seems well satisfied by the developing fleet for the near term. |
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Pier Pressure (June 17, 2011)
June 17, 2011 |
The proposed project to expand Pier 400 – Berth 408 in the port of Los Angeles has engendered a fair bit of media coverage recently and begged questions as to the potential impact on the tanker market and the surrounding environment. Although it will not be the first berth capable of accommodating Very Large Crude Carriers (VLCCs) on the United States West Coast, the commencement of the project could yield material impacts on the overall traffic patterns, demurrage and turn around time for vessels moving into the Port of Los Angeles. However at present, it is difficult to see the imminent need for expanded berth capacity given the tepid economic climate. Regardless, the increasing role of imported crude oil in meeting US West Coast demand raises awareness about the potentially fragile supply scenario over the long-term.
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