Fairplay: How Spike in Crude Supply Disruptions Impacts Tankers

14 June 2016: “However, from a broader, more medium-term perspective, crude supply disruptions can be viewed as a positive for the tanker space. ‘Generally, tanker owners should look at these developments with a smile on their face,’ wrote brokerage and consultancy Poten & Partners in a 10 June research note. ‘The oil continues to flow, and the tanker industry is, by its nature, well equipped to deal with changes in trade flows as a result of supply disruptions in various parts of the world. Disruptions create inefficiencies and bottlenecks, which are generally good for tanker rates.’ “Such disruptions may continue for an extended period, said Poten, drawing a distinction between wildfire-induced issues in Canada and disruptions elsewhere: ‘While the problems in Canada are weather-related and production outages have already started to subside, most of the other supply disruptions are due to political disputes or conflicts, and are expected to last longer.’ “‘In terms of world crude oil production, the Canadian wildfires have had the biggest impact – with an average supply disruption of 800,000 b/d in May – but the problems in Nigeria have a more profound and potentially longer-lasting impact on the tanker markets,’ said Poten. ‘Disruptions resulting from political unrest tend to last much longer, and these have made up 90% of the unplanned production outages in 2016 to date.’ “Both Poten and OPEC noted that the unusually high level of supply disruptions has played a role in these sharp price gains. ” According to Poten, the price rise ‘may have brought the independent shale producers back to life’. In the first week of June, US oil production actually rose 10,000 b/d. ‘Although everybody expected US production to recover with rising oil prices, the speed of this turnaround caught many pundits by surprise,’ said Poten. “‘If it continues, it will increase overall world crude oil supply, counter disruptions elsewhere, and keep oil prices from rising too quickly or to levels that may choke off demand,’ said Poten, adding that, ‘over time, it may even stimulate more US crude oil exports.'”