The oil production cuts announced by OPEC earlier this month seem to be adding to the uncertainty of the tanker market’s recovery.
To remind, OPEC and Russia agreed to cut oil production by 1.2 million barrels a day.
Overall, the market is believed to be oversupplied, hence the impact of the decision is likely to be muted, according to industry analysts .
Commenting on the move, the Chief Executive Officer (CEO) of Concordia Maritime, Kim Ullman, said that an OPEC cut is a better alternative for the product tanker market than a potential U.S. cut of oil production.
“More OPEC oil is good for tankers and, from that perspective, less oil from OPEC is not expected to be entirely good for the market. But, half-jokingly, I would say, I would rather take an OPEC production cut than a cut from the U.S.,” Ullman said, speaking in a Capital Link podcast.
Namely, the U.S. has just become a net oil exporter for the first time in 75 years, in addition to becoming the largest crude oil producer in the world, surpassing Russia and Saudi Arabia, data from IEA shows.
This has been very positive for the ton-mile demand for tankers, especially should China resume its imports of U.S. crude oil following the talks between the two countries on bilateral trade deals.
The U.S., Russia and Saudi Arabia are three major producers of oil outside the OPEC and they make up almost 35% of oil production on global scale.
Ullman believes that there is no need for the production cut to be long-lasting since the inventory levels seem to be relatively balanced at the moment.
Moving forward, the outlook for the product tanker market is pretty positive, especially amid expected high level of scrapping in 2019.
Ullman is confident that the reasonably high rate of scrapping will be resumed next year, especially due to considerable investment that is needed for fitting of ballast water treatment systems on board ships and higher bunker prices.
As explained, high scrapping coupled with low ordering are anticipated to keep the market healthy.
World Maritime News Staff