07OCT2019 - NEWS - Product Tankers In Line for Major Profits

The product tanker market is primed for a strong finish to the end of the year, as predicted. In its latest weekly report, shipbroker Gibson said that “with most crude tanker markets surging to multi-year highs, many have questioned whether the clean sector should expect to experience the same fortunes. The last few days have seen product tankers firm both East and West, in some cases considerably. Now, many are questioning whether this recent firming the start of a more sustainable trend or merely a short-term blip?”

According to Gibson, “great faith has been placed in IMO2020, particularly in terms of its impact on distillates trading. However, can owners still realistically expect this seismic event to transform prospects in the clean tanker sector over the coming months? To answer this question, it is first important to look at how expectations for demand for the different types of compliant fuels have evolved since the convention was first ratified back in 2016. Initially, a consensus opinion emerged that marine gasoil (MGO) would offer the primary route to compliance in the early days of 2020, and with a surge in demand for gasoil, clean product tankers would stand to benefit from increased trading opportunities. This theory is still valid. However, the supply of 0.5% fuel oil (VLSFO) appears to be improving, with an ever-increasing number of suppliers now offering the fuel on a regular basis. If more VLSFO is available than originally anticipated, it would seem logical that MGO demand growth expectations might need to be pared back. However, even if VLSFO supply does exceed initial expectations, industry estimates still point towards an increase in MGO demand of 1 to 2 million b/d, with the transportation of gasoil and other blending components still supporting trade. What is unclear, however, is the impact on tonne miles in terms of how much product will be traded long haul versus retained locally for bunkering demand. In any case, increased products trading activity around IMO2020 should be a supportive, even if it isn’t obvious just yet”.