February 26

2016
HOUSTON / NEW YORK / LONDON / ATHENS / SINGAPORE / GUANGZHOU / PERTH

WAFWOFleet esv
2 015
5 May 2013
POTEN TANKER OPINION Bi or No De?
Fig. 1: IEA Crude Oil Trade Outlook 2021 vs 2015
Reading Tanker Tea Leaves
IEA paints lukewarm outlook for crude oil tankers
Every year around this time, the International Energy Agency
(IEA) publishes their Medium Term Oil Market Report. The
report includes the customary oil supply and demand
forecasts and refinery dynamics. Most interesting for us in the
tanker industry is their detailed discussion of the crude oil
trade flows. What does the latest IEA outlook have in stock
for the tanker market?
The IEA forecasts oil demand to increase from 94.4 Million
barrels per day (Mb/d) in 2015 to 101.6 Mb/d in 2021, as Non-
OECD demand increases by 8.1 Mb/d while OECD demand
declines by 1 Mb/d during the same period. Over these six
years, oil production in the OECD Americas regains its growth
trajectory after an initial decline in 2016. This region increases
production by 2.4 Mb/d from the trough seen in 2016/17. The
bulk of the demand growth will be satisfied by a combination Source: IEA
of additional OPEC production and drawdowns of commercial Fig 2: IEA Crude Oil Trade Outlook in Million B/D and Billion Ton Miles
oil stocks. In their outlook, the IEA estimates that the “Call on
Trade in Mb/d Trade in Ton Miles (Bln)
OPEC crude and Stock Changes” will increase by 4.7 Mb/d
Import Region 2015 2021 Change 2015 2021 Change
between 2015 and 2021.
OECD Americas 3.9 3.5 -0.4 1,251 1,139 -112.1
In recent years, the tanker market benefited from a significant OECD Europe 9.6 8.8 -0.8 2,070 1,927 -142.5
build-up in inventories as oil supply outstrips demand. OECD Asia/Oceania 5.8 4.6 -1.2 1,741 1,395 -346.7
Unfortunately for the tanker market, this trend is expected to China 6.6 8.4 +1.8 2,196 2,711 +514.2
reverse in 2017. The IEA expects that a significant portion of Other Asia 7.1 8.4 +1.3 1,005 1,183 +178.3
the oil demand growth (around 800,000 b/d) between 2018 33.0 33.7 +0.7 8,264 8,355 +91.1
2.1% 1.1%
and 2021 will be satisfied by stock drawdowns, and when
refiners draw down their feedstock inventories, it reduces Source: IEA / Poten & Partners
their crude oil import requirements.
recent months as the price spread between U.S. based crudes and Brent has
The IEA sees the largest changes in the trade flows heading decreased (partly as a result of the U.S. crude oil export ban). The lower
into Asia: Significant growth in flows from the AG to China Brent/WTI spread in combination with the high cost of rail transportation to
(+1.1 Mb/d) and Other Asia, mainly India (+0.9Mb/d), partly the East Coast has made it more difficult for domestic Bakken crude to
offset by a decline in trade to OECD Asia (-1.2 Mb/d). The FSU compete with seaborne imports. This is expected to continue.
reduces shipments to Europe by 300 Kb/d and focuses more
on Asia, where imports from FSU increase; unfortunately, African exports are forecast to shrink by 0.6 Mb/d as production is expected
largely in the form of pipeline crude. A small positive is the to decline by about 10% over the period and local demand growth is further
increased exports (albeit short haul) out of the Eastern limiting the volumes available for exports.
Siberian port of Kozmino. So what are the implications of all these trade changes for tanker demand?
The IEA expects only limited volumes of U.S. crude exports as Figure 1 shows the expected trade flows in 2021 and the changes compared
crude price differentials are expected to remain at levels that to 2015. We use the distances of representative voyages to estimate the
don’t facilitate exports. On the other hand, once the planned ton-mile (TM) impact, which is summarized in Figure 2.
1.1 Mb/d pipeline from Western Canada to the East Coast Chinese imports will add about 514 Bn TM but these gains are largely offset
becomes operational, heavy Canadian crude is expected to by a reduction of imports into OECD Asia/Oceania. Middle Eastern exports
displace a part of current Canadian imports, mainly from the increase in volume, but the ton-miles remain about the same, as higher
Middle East. The IEA forecasts a small (0.2 Mb/d) increase in short haul volumes to India replace long haul moves to the Atlantic.
exports from North America to China and it will depend on the Combining all the trade flows, and taking into account the expected
pipeline situation in Canada which route such crude will use. inventory drawdowns, the IEA forecast results in a ton-mile increase of only
West African exports to North America have restarted in 1.1% over the 6 year period. Not something to get too excited about.
In contrast, the current crude tanker orderbook amounts to about 20% of
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