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Crude Tanker Stocks and ETFs: The Current Outlook

PART:
1 2 3 4 5 6 7 8
Part 3
Crude Tanker Stocks and ETFs: The Current Outlook PART 3 OF 8

Crude Tanker Fleet Growth: An Industry Headache

Article focus

As we saw in the previous part of this series, crude tanker rates have fallen significantly in 2017—especially in the third quarter. One of the big reasons for the fall was high fleet growth. Fleet growth in 2016 was higher than in 2015 and 2014. However, in 2017, fleet growth is even higher than in 2016.

Crude Tanker Fleet Growth: An Industry Headache

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In 2016, the VLCC (very large crude carrier) fleet grew ~7.0% and the Suezmax fleet grew 5.0%, compared to 1.3% and 3.0% fleet growth in 2014 and 2015, respectively.

VLCC growth in 2017

According to Weber report, since the start of the year, 22 VLCCs (very large crude carrier) have increased (net of scrapping), which brings the total VLCCs to 706 as of September 22, 2017. The VLCC fleet is 5% higher year-over-year.

Suezmax growth in 2017

According to Weber reports, since the start of the year, the global Suezmax vessels have grown by 37 to 499 as of September 22, 2017. The net Suezmax fleet growth stands at 8% year-to-date. The Suezmax vessels are 9% higher year-over-year.

Orderbook

The VLCC order book stands at 14% and the Suezmax order book stands at 12%. An order book tells us how many tankers are expected to join the fleet. A heavy order book is likely to cause a demand and supply imbalance, which can pressure tanker rates. On the other hand, if the newbuild supply doesn’t meet the increasing demand, it could boost tanker rates.

Heavy fleet growth pressures tanker rates, which can prove negative for crude tanker companies such as Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), Euronav (EURN), and DHT Holdings (DHT).

In the next part of the series, we’ll see where crude tanker prices are heading and what they mean for the tanker industry.

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