The outlook for crude oil tanker demand didn’t look great either at the beginning of 2013. As we discussed in our crude tanker business overview, crude tankers generally start their journeys from the Middle East or West Africa and end up in Asia, Europe, or the United States.
Global economic activity
Global economic activity might have picked up speed in 2013, as the European Central Bank pledged support for the euro currency, Japan embarked on massive quantitative easing, China injected stimulus in late 2012, and the U.S. Federal Reserve announced “infinite quantitative easing.” Several economic indicators such as the Global Manufacturing PMI (purchasing managers’ index), new orders, and industrial output pointed towards some recovery. But many uncertainties remained.
China’s crude oil imports had played a significant part in growth up to 2012. Imports from OPEC nations, a benchmark for the seaborne crude oil shipment to China, rose from roughly 2.6 million barrels a day in 2010 to 3.1 million barrels a day in 2012—representing a 20.17% increase or compounded annual growth of 9.62%. But 2012’s crude oil imports were higher than they would have been if the country didn’t import oil for strategic stockpiling purposes. This meant demand for tankers going to China might not grow as much as it would have normally in 2013.
U.S. oil imports
Fundamentals in the United States didn’t look rosy either. As oil prices and drilling activities remained high, the EIA (Energy Information Agency) and DOE (Department of Energy) expected the U.S. to produce more shale oil in 2013. Surging domestic production meant U.S. refiners would use more domestic oil and less imported oil—a negative for tankers.
If demand for oil had picked up, refiners might have continued to support imported oil. Yet this wasn’t the case up to 2013. A weak labor market, low economic activity, infrequent driving, high oil prices, and cheaper fuel alternatives—such as natural gas—led to lower U.S. oil consumption up to the start of 2012. As long as the trend continued, tanker rates remained pressured in 2013.