Euronav Gives the Ups and Downs of the Crude Tanker Industry Today
In this part of our series, we’ll take a look at what Euronav (EURN) said about the crude tanker industry in its 2Q17 conference call. This outlook will help us assess the future of Euronav and peers Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), DHT Holdings (DHT), Frontline (FRO), Navios Maritime Midstream Partners (NAP), and Nordic American Tankers (NAT).
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Positives and negatives
Euronav gave some positives and negatives. Crude oil demand has improved. In 2Q17, the IEA upgraded its demand forecast for both 2017 and 2018, especially due to increasing demand from the Far East and an oil price range conducive to economic expansion.
Meanwhile, the decrease in oil production due to the OPEC (Organization of the Petroleum Exporting Countries) production cut has been offset by growing oil production from Nigeria and Libya.
However, the ton-mile demand looks dynamic in the current environment and remains changeable, and Euronav believes the ton-mile demand remains positive for the tanker industry.
But these positive factors are overshadowed by one negative factor: order books. A high number of VLCCs (very large crude carriers) and Suezmax newbuild deliveries are lined up for the next 12–18 months, with 28 VLCCs and 23 Suezmaxes planned for delivery in the second half of 2017. Almost every week, a new tanker will enter the global fleet until the end of 2018, and shipyards are aggressively discounting newbuild tankers to attract more orders.
According to Euronav, if the illness is low freight rates, the cure is sustained low freight rates, as low freight rates should increase scrapping activity and bring the market back into balance.