Prospects for the crude oil tanker market are expected to stay strong for at least the next year helped by low ship ordering, despite the loss of some trade from Russia due to Western sanctions, leading ship operators say.
Russia has increased exports to Asia, Africa and South America following the imposition of Western sanctions for its invasion of Ukraine. But the sanctions mean many tanker operators are reluctant, or unable, to transport those cargoes.
Nevertheless, tanker players say more longer haul shipments have replaced much of that trade into Europe ahead of looming restrictions on Russian shipments to the European Union.
“With the Russian trade there has been some displacement, but there is a good amount of upside for the tanker business,” Thomas Trovato, head of investor relations with tanker group International Seaways, told a Capital Link shipping conference in London this week.
Ratings agency Moody’s said in its latest sector outlook this month that it expected tanker rates to remain at least stable over the next 12 months.
Moody’s added that redirection of oil trade flows had led to higher tonne-mile demand for tankers, especially for the aframax and suezmax oil tanker segments, as many European companies look to source crude and oil products from more distant markets.
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Tonne miles are an indicator of shipping demand, measuring transported cargo volume multiplied by distance.
“I just don’t see the order book increasing in the next two years and I see demand increasing,” Robert Burke, chief executive of Ridgebury Tankers, told the Capital Link conference.
“I think it is going to be a really good 24 months,” he said, adding that prospects were strong for the winter season.
Crude oil tanker rates in some segments are up over 40% over the past week.
Ted Petrone, vice chairman of shipping group Navios Corporation, said the lack of large scale tanker ordering was also bolstering rates.
“There are extremely low inventories – both crude and products – and that is very helpful,” he said.
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