Viewpoint: Light at the end of the tunnel for VLCCs

Viewpoint: Light at the end of the tunnel for VLCCs

London, 4 January (Argus) — There may be light at the end of the Covid-19 tunnel for VLCC owners, with several factors pointing to higher demand, although any increase in rates relative to bunker costs is likely to be gradual.

OECD oil stocks are back below the five-year average, and Argus Consulting expects global demand to return to within 1.4mn b/d of pre-Covid levels in 2022, compared with 7mn b/d below 2019 levels in 2020. This should mean more barrels moving from producer to consumer in 2022, and many tanker owners were cautiously optimistic after the third quarter, even after an extended challenging period for the industry (see chart).

VLCC demand in the Mideast Gulf, by far the vessels' largest market, rose by 1.37mn b/d from August to November, in line with Opec+ raising its production ceiling by 400,000 b/d each month. Atlantic basin loadings — which must travel further to reach east Asia, meaning more tonne miles per voyage — also increased, helped by rising west African production and favourable Mars Blend economics in Asia-Pacific in November.