Deluli: the outlook of the finished oil tanker market is bleak

- Feb 20, 2020-

While the refined oil transportation market is preparing to increase the transportation price after the new sulfur limitation regulations of IMO 2020, the International Energy Agency (IEA) shows the grim situation of the refined oil transportation market after 2025 in the latest release of world energy outlook 2019.            

The International Energy Agency says global oil demand will grow by an average of about 1 million barrels per day per year by 2025.            

However, with the acceleration of electric vehicle sales and the continuous improvement of vehicle fuel efficiency, the average growth rate of oil demand will fall to 0.3% in 2025-2030, and further slow down to 0.1% in 2030.            

According to the data of the International Energy Agency, in the late 1920s, the sales volume of traditional internal combustion engine vehicles will begin to decline, and the fuel consumption of passenger vehicles will peak. On the other hand, electric vehicle sales will increase from 10 million in 2025 to 18 million in 2030 and 33 million in 2040. By 2040, about 330 million electric vehicles will reduce oil demand by about 4 million barrels per day, and another 9 million barrels per day will disappear due to more fuel-efficient engines.            

It is expected that the growth of oil demand in 2025-2030 will decrease significantly, and the demand will almost stagnate in 2030, which will have a great impact on oil producers, refiners and Tanker Owners. The weak growth of refined oil demand, coupled with the expansion of refinery capacity in the demand growth center, will significantly squeeze the growth of refined oil trade in 2025-2030. Before the slow growth in the 1930s, with the decline of fuel demand for road transportation (gasoline and diesel), especially the import of refined oil in the United States and Europe will shrink. However, the only bright spot for European refined oil imports is that refinery capacity will fall relatively faster than demand during this period.            

On the other hand, developing countries in Latin America and Africa will continue to import more refined oil products as their demand increases. However, any major refinery capacity expansion in these regions will inhibit their import growth. Although it is expected that the improvement of automobile fuel efficiency and the increase of electric vehicle quantity will also affect the oil demand in the Asia Pacific region, the overall demand in the Asia Pacific region will maintain a healthy growth after 2025. Nevertheless, it is expected that the surge in refining capacity in the Asia Pacific region will narrow its demand gap for gasoline and diesel, thus reducing inter regional imports. On the other hand, trade in the Asian region will continue to grow.            

In general, the sharp slowdown of global oil demand growth after 2025 will be reflected in the oil product trade. The refined tanker market will have to adjust accordingly, because in the absence of any significant growth in trade, new ship orders in 10 years will be mainly used for fleet renewal.