Is a new wave of demand coming in the tanker market? !

- Feb 20, 2020-

Frontline, a Norwegian shipping company, said recently that under the background of the increase of shale oil output in the United States and the coming into force of the latest sulfur restriction order of the International Maritime Organization (IMO), the oil tanker market will usher in an important "turning point", and a new wave of demand is coming, for which frontline has been well prepared.            

Frontline, owned by Norwegian ship king John Fredriksen, is one of the world's largest tanker operators. Frontline's bullish view on the tanker market is due to three reasons: the increase of crude oil production in the United States, the end of refinery maintenance period, and the International Maritime Organization's sulfur emission restriction rules that will come into effect in 2020.            

Robert Hvide MacLeod, frontline's CEO, said that frontline recently acquired 10 Suez tankers, which is expected to significantly increase the company's profit potential at this ideal time point.            

It is reported that frontline just a few days ago reached an agreement with Trafigura group, a global commodity trading giant, to acquire 10 + 4 Suez oil tankers under Trafigura, worth 675.3 million US dollars. At the same time, Trafigura group became a shareholder of frontline through this strategic investment.            

Robert Hvide MacLeod, chief executive of frontline management, said: "the deal benefited from our strong belief in the fundamentals of the tanker market. We expect a significant increase in freight rates and the deal will have a direct impact on our earnings. "            

According to the prediction of the International Energy Agency (IEA), driven by the booming production of shale oil, the United States will become a net exporter of crude oil in 2021, while the bottleneck of oil pipeline transportation volume is expected to be solved in the next 18 months to further increase the output growth rate of crude oil. Since most of the shale oil produced in the United States will be transported to Asia, which is the longest shipping route, it will greatly benefit oil ship operators.            

On the other hand, after the implementation of the sulfur limit order, if the owner does not want to use low sulfur fuel oil, he needs to install exhaust gas scrubbers on the ship. Frontline predicts that a large number of old ships will be eliminated as a result, and for frontline with an average fleet age of less than 4 years, the market competition is expected to decrease accordingly.            

Lukas daul, an analyst at ABG sundal collier, said that after the new regulations come into effect, there is bound to be a period of adjustment and adaptation. People predict that the supply and transportation mode may be slightly disturbed, which is usually good news for shipowners; various signs show that the industry has gradually improved to a good level never seen since 2015.