Signal Ocean looks at end-year outlook for crude tankers amid geopolitical crisis


In the preface to its Crude Tanker Annual Review – 2022, Signal Ocean notes that 2022 saw a record boom in crude and product tanker freight rates. Geopolitical tensions between Russia and Ukraine reshaped the macroeconomic scene and we entered a new era of changed seaborne oil trade flows. December 5, 2022, was the day the new era began with the enforcement of the EU ban on Russian oil trade.

In parallel, the G7 price cap for crude oil and petroleum originating in or exported from Russia of $60 per barrel went into effect. The current decision provides for a transitional period of 45 days for vessels carrying crude oil originating in Russia that was purchased and loaded onto the vessel before December 5, 2022, and discharged at the final port of destination before January 19, 2023. In addition, there is a transition period of 90 days after any change in the price cap to ensure consistent implementation by all operators.

The year ends with critical macroeconomic challenges for the future of VLCCs and crude oil freight rates, observes Signal Ocean. There is uncertainty about how oil supply will evolve given current oil demand growth and the impact on trade flows as Europe continued to rely on Russian crude oil imports through the end of the third quarter.
There are many discussions about the existing trade and scenarios about a possible dark trade involving Russia-linked tankers. At the same time, most European shipowners already prefer to avoid any cargo related to Russian oil, while Asia continues to buy large quantities of Russian oil. Before the new year begins, we take a moment to consider the impact of recent decisions by analyzing the crude oil tanker industry today.

A year ago, pandemic concerns were at the top of the agenda due to the negative impact on freight rates, demand and supply of vessels, while now, says Signal Ocean, we are facing critical geopolitical challenges in the oil sector that are leading to an increasing change in demand for tonne-miles and days for crude oil transportation.

It looks like the fourth quarter of the year will end with a downward trend in VLCC rates, while Suezmax and Aframax Baltic Sea – Med rates are exceptionally strong. Signal Ocean expects Russian oil exports from Black Sea and Baltic ports to Asia to replace oil exports from the United States, which will further dampen future VLCC demand.

However, VLCC demand in terms of tonne-days and miles is still significantly higher than in the previous two years, it points out, fuelling positive expectations for VLCC freight revenues in the days ahead.

Interestingly, the upswing in freight rates observed last quarter continues to be reflected in the upward trend in vessel speeds, it adds. Current speed figures have surpassed the levels of the previous two years and are now at their highest level since the beginning of the year.