(Re) Balancing Act

10 Jun 2016: Are we at the beginning of the long-expected market rebalancing? The U.S. Energy Information Administration (EIA) came out with an analysis brief yesterday discussing oil supply disruptions worldwide. According to the EIA, unplanned global oil supply disruptions reached 3.6 million barrels per day (mb/d) in May 2016, the highest level since they started tracking this in January 2011. It is not difficult to identify the culprits; we have discussed a number of them in our recent tanker opinions: Canadian forest fires, production and transportation disruptions in Nigeria as well as continued problems in Libya have been some of the most high profile ones. As these disruptions have taken a bite out of global supply, oil demand keeps chugging along, helped by solid growth in most developing economies, in particular in Asia. Last week we discussed the rapid expansion of crude oil demand and imports by independent Chinese refiners, which have provided a boost to the tanker market, in particular the VLCCs. The combination of production outages and continued demand growth have pushed oil prices above $50/bbl, their highest level since the first half of last year. This, in turn, may have brought the independent shale oil producers in the U.S. back to life. Last week, data showed an unexpected increase in active rigs in the U.S. and oil production rose by 10,000 b/d. A small increase, but nevertheless significant, because it follows a long period of steady declines in U.S. production. The question for tanker owners is: are we at the beginning of the long-awaited market correction or is this just a combination of random factors that does not indicate a new trend? Download Here