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Industry Opinions


Moderating IEA View Limiting Tanker Outlook
July 13, 2012
In its recent Oil Market Report (OMR), the International Energy Agency (IEA) kept its forecast for 2012 global oil demand roughly unchanged, while lowering its estimates for 2013 global oil demand growth from those levels previously reported in its medium term outlooks. Given its expectations for growth in non-OPEC supply and OPEC natural gas Liquids (NGLs), the IEA forecast call on OPEC crude in 2013 remains unchanged from 2012. With OPEC maintaining aggressive output levels to promote massive global stock builds in 1h12, any return to normalised inventory management during 2012-13 would suggest a sharp drop in OPEC production in the Arabian Gulf (AG).
Japanese Utility Demand Supports Aframaxes
July 06, 2012
Although the Japanese government has approved the start-up of two nuclear reactors in July in order to avoid power shortages during peak summer demand, the removal of virtually all of Japan’s nuclear generating capacity following the Fukushima disaster in 2011 should continue to support LNG, fuel oil and crude imports in the medium term. Shifting import sourcing patterns for fuel oil and crude for direct burning at Japanese utilities have been supportive for Aframax demand, and this should continue, despite modest declines from the nuclear start-ups.
A Delayed Launch
June 29, 2012
Although estimates of how long repair work will last are better left until Motiva completes its inspection assessments, guesses swirling in the media suggest an outage of at least six months, or a longer.
US Crude Stock Build Continues
June 22, 2012
Six weeks ago, we observed that a surprise US crude inventory build was consistent with seasonal patterns, risk aversion ahead of Iran sanctions, trapped Cushing storage and Motiva stock building. We suggested that these rising inventories, driven by surging US shale oil production, poised a threat to crude tanker demand on any normalisation of inventory levels in a weakening demand environment. Since then, US crude stocks have continued to rise against historical seasonal patterns -- despite strong crude runs -- thus raising the stakes in the prospects for the tanker market.
Chinese Crude Sourcing Offers Continued Support to VLCCs
June 15, 2012
The rapid growth of Chinese oil product demand, refining capacity and crude imports has been a supportive feature of crude tanker demand for years, and is poised to continue this trend. Recent shifts in Chinese crude import volumes and sourcing patterns have provided a recent boost to tanker demand in 1h12 and have allowed VLCC earnings to recover. Many of these crude import shifts are part of a secular trend that will continue to be supportive for the sector, but some of the recent activity is more ephemeral, suggesting that demand growth may slow during the balance of 2012.
PADD 1 Crude Imports Poised to Rebound
June 08, 2012
At first glance, crude oil import data for PADD 1 (representing the US East Coast) might suggest that volumes are in the midst of a steady decline that might continue for many more months. As the chart below shows, PADD 1 crude imports were near their 5-year lows in March, the most recent monthly data available. In fact, imports into this crucial bellwether of the US economy are down nearly 250 thousand barrels per day since summer 2010. These developments might appear to suggest the type of gloom and doom that many have been anticipating, but a closer look at the data reveals that this is not necessarily the case.
Shifting Panamax Supply Boosts Earnings
June 01, 2012
Panamax spot earnings in the Atlantic basin have been climbing consistently over the past month, especially for Panamaxes trading in the Caribbean spot market. In fact, Panamax Caribbean earnings are currently exceeding $20,000 per day, a peak level usually only seen in winter months. This development is surprising given depressed earning levels at the beginning of the year. This development is even more surprising relative to the Aframax Caribbean market, where earnings are currently approximately one half of Panamax earnings.
Shifting FSU Export Flows
May 25, 2012
After providing 2.8 mbpd of incremental liquids supply during 2004-09, production growth in the former Soviet Union (FSU) slowed significantly during 2010-11, as shown in the chart below. Easing global oil demand growth, field maintenance issues in Azerbaijan and Kazakhstan, expansion work on the Caspian Pipeline Consortium (CPC) pipeline and new field development delays all contributed to the FSU slowdown. Russian production, however, has continued to hit new post-Soviet highs, benefitting from additional output at the Vankor field and other eastern Siberia greenfield projects.
Chinese Data Pressures Outlook
May 18, 2012

For the past ten years, China has been a reliable source of bullish macroeconomic indicators across many sectors, although China has not been completely insulated from worldwide economic slowdowns and recession. Even as Europe has slipped towards recession and the United States has produced progressively-weaker numbers, sustained Chinese growth had allowed global economists to maintain positive sentiment towards the region amid a two-tier global economy. Unfortunately, recent statistics out of China are looking worrisome.

After the Stock Build
May 11, 2012
In this week’s Petroleum Status Report, the US Energy Intelligence Agency (EIA) reported that US commercial crude inventories rose a higher-than-expected 3.7 MB last week, to 379.5 MB, the highest level since 1990. Crude oil prices declined on the news, also confronted by electoral uncertainty and recessionary conditions in Europe and weaker Chinese economic statistics. US crude stocks have jumped by 14.3 MB, or 511 kbpd, during the past four weeks, supported by a 3.5 MB rise in Cushing stocks, still awaiting an outlet in the Seaway pipeline reversal that starts on May 17th. Still, US crude inventories excluding Cushing, at 335.4 MB, are near previous peaks in the weekly data.
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