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Must-know: Vessel prices are increasing weekly
Secondhand vessels’ weekly price changes have a significant impact on the crude tanker industry’s near-term fundamentals. Weekly vessel values have been increasing.
Suezmax prices reached a 52-week high of $77 million in the week ending November 25—compared to $76 million the previous week and $74 million in same week last month.
Oil prices stumbled during Thursday’s trading session. The West Texas Intermediate (or WTI) benchmark fell below $70 per barrel for the first time in more than four years.
For the week ending November 21, total product supplied was 20.5 million barrels per day—compared to 20.1 million barrels per day in the third week of October.
For the week ending November 21, US crude oil imports averaged 7.5 million barrels per day (or bpd). According to EIA data, this was a decline of 165,000 bpd from the previous week.
In order to determine the crude oil shipping industry’s revenues and earnings, analysts and money managers follow the Baltic Dirty Tanker Index.
Oil demand is directly related to auto sales. With a weakening economy and piling inventories, China’s auto sales have a negative impact on the shipping industry.
Crude tankers are mainly used to transport deep sea crude oil from production sites to refineries. They range in size from 55,000 deadweight tonnes (or DWT) up to ~450,000 DWT.
A stronger greenback makes US dollar–priced commodities like oil more expensive for buyers using weaker currencies, which in turn tends to hit commodity prices negatively.
The International Energy Agency (or IEA) recently cut its forecasts for global oil demand growth for 2014 and 2015 on continuing weaker expectations for world economic growth.
With rising energy demand from the economic powerhouse of Asia, China has been buying more oil from abroad amid a slowdown in the economy’s growth rate.
The number of US oil products supplied indicates the consumption of petroleum products. It measures the disappearance of these products from primary sources like refineries.
Canada is a top oil exporter to the US. According to Statistics Canada, shipments of energy products—including bitumen from Alberta’s oil sands, the world’s third-largest oil reserve—are the largest component of Canada’s exports.
Falling US imports affect the crude tanker industry in a negative way. Fewer shipments to the country indicate less shipping demand, all else being equal.
In order to assess the industry’s future fundamental outlook, managers use the oil tanker orderbook as an important yardstick. It consists of the number of ships that have been ordered and the number of ships under construction.
Since secondhand vessels can be delivered within a few months, they tend to reflect industry participants’ expectations for medium-term fundamentals and rates, unlike newbuilds, for which two years of delivery time is mandatory.
A tanker takes almost two or three-plus years to build, and each costs more than ~$60 million. Unlike shipping rates in the spot market, newbuild prices are less volatile and aren’t subject to seasonality.
The Baltic Dirty Tanker Index interests analysts and money managers. They use it to assess the revenue and earnings potential of the crude oil shipping industry.
Energy transportation is driven by global economic growth and differences in consumption and production, which reflect in cyclical freight rates that vary according to vessel supply and demand.
China is the world’s top iron ore and coal consumer. China imports almost 60% of the world’s seaborne iron ore, while its coal trade accounts for almost a quarter of the global trade.