DNB Markets highlights tanker challenges

Highest fleet growth in 40 years, combined with OPEC cuts, will hurt tanker rates, analysts say.

Tanker fleet growth is set to hit the highest level since before the Jahre Viking was launched, leading DNB Markets to lower its rate forecasts for crude carriers.

Analysts led by Nicolay Dyvik say that crude tanker fleet growth will peak at 7.9% year-on-year in April, the highest since October 1977.

“We believe the combination of 40-year-high fleet growth next month and the ongoing OPEC cut will challenge the tanker market over the coming quarters,” Dyvik and colleagues Petter Haugen and Jorgen Lian said.

“With its output cut, OPEC has removed the contango, which again is likely to flush out inventories, both floating and land-based, both hurting seaborne crude transportation demand.”

With 26 million deadweight of tankers set to arrive in 2017 and a further 21.7 million to follow in 2018, the analysts do not expect an immediate recovery despite regulatory changes being likely to increase scrapping.

DNB Markets is now forecasting VLCC rates of $25,000 per day in 2017 and 2018, rising to $31,000 per day in 2019.