Global tanker demand is expected to grow by a solid 5% in 2023 driven by the reshuffling of Russian trade routes and rising production, according to trade body Bimco.

Chief shipping analyst Niels Rasmussen said growth in oil production and consumption were pushing increased demand in 2022, while longer voyages linked to the European Union ban on Russian seaborne imports would be the driver for 2023.

Despite concerns about global economic demand, the Russian situation, the historically low tanker orderbook, regulatory changes to limit steaming speeds and increased oil production are likely to point to further gains in 2023.

“Overall, we expect further and solid improvements for both tanker markets in 2023 although headwinds for the global economy remain a risk,” said Rasmussen in his tanker marker outlook for the third quarter of 2022.

Rasmussen’s analysis is in line with other data which has highlighted the significance of the shifting trade routes following Russia’s invasion of Ukraine in February.

Poten & Partners said the main beneficiary of Europe replacing Russian oil has been the US Gulf, which is supplying 12% of the continent’s needs, up from 6%.

Rasmussen said revised Russian trading patterns will be of greater importance to the market than the expected global growth in oil production, with 5.65m more barrels per day pumped in 2023 compared with 2021.

Russia trade

The EU will have to find new suppliers — and Russia new buyers — from further away, increasing tonne-mile demand for both crude and product tankers, said the shipowner organisation. Some pipeline volumes between Russia and the EU will also be banned and shifted to seaborne delivery.

“We estimate that the change in EU’s trading patterns will add 3%-4% to both crude and product tanker demand on top of the general recovery in production and consumption,” said Rasmussen.

He said that changes in Russia’s export patterns would not add much to global demand owing to likely Russian production cuts of some 15% in 2023, according to figures from the US Energy Information Administration.

The tanker sector has already benefited financially from Russia’s invasion of Ukraine. Tonne-miles for imports to Europe have increased by 17.2% over the 2021 average as tankers have made longer voyages from the Middle East and US Gulf.

The Baltic Exchange dirty tanker index has been on average 86% higher than in 2021 and 113% on the clean side.

Rasmussen said the key concerns for the tanker sector was the economic health of China, with the International Monetary Fund warning of a risk of global recession.

Uncertainties remain

Growth in China is expected to hit its lowest levels since 1990 at 3.3% in 2022 and 4.6% the following year. So far this year, tonne-miles to China have reduced by 8% on 2021.

The economic health of China is of particular concern for VLCCs, which carry about 85% of Chinese seaborne crude imports.

“While uncertainties remain, everything points towards a solid strengthening of both the crude and product markets in 2023, and higher freight rates, time charter rates, and secondhand ship prices,” said Rasmussen.