Oil prices will likely remain on the uptrend in 1Q15
For 1Q15, KDB Daewoo Securities commented that oil prices likely won’t remain on the uptrend due to the rising inventory burden in the US.
For the week ending February 6, 2015, the total products supplied stood at 19.7 MMbbls/d—compared to 18.6 MMbbls/d in the previous week.
Almost 97% of Canada’s crude oil exports are shipped to the US. Crude oil exports account for a large portion of the US currency that’s earned by Canada.
According to EIA data, US crude oil imports averaged 7.3 MMbbls/d last week—down by 101,000 barrels per day, or bpd, from the previous week.
With US drillers cutting the number of oil rigs in service to the fewest since December 2011, oil prices reversed the trend. It’s recovering from its lowest levels.
In January 2014, crude oil imports totaled 27.98 million tons—or 6.59 million barrels per day, or MMbbls/d. This was 0.6% below the levels last year.
China’s auto sales have a significant impact on the shipping industry. Auto sales drive the oil consumption. In January 2015, 2.32 million cars were sold in China.
In January 2015, five-year VLCCs’ (very large crude carriers) prices increased to $80.7 million—from $77.1 million in December 2014.
Each of the newbuilds costs more than ~$60 million. Unlike shipping rates in the spot market, newbuilds’ prices are less volatile. They aren’t subject to seasonality.
On a YTD basis, the Baltic Dirty Tanker Index declined 5% to 841 on February 20, 2015. On a YoY basis, the index recorded a 10.50% increase.
The Brent crude price dropped below $58 per barrel after the IEA announced that oil prices may fall with the continuous stock increase in 2015.
One of the major factors that dry bulk shipping investors should watch out for is China’s crude steel production.
Besides coal, China is also the world’s top iron ore consumer. China imports almost 60% of the world’s seaborne iron ore.
In 2014, China’s coal imports recorded their first year-over-year dip in six years. Imports dropped 10.9% to 291.2 million tonnes.
The dry bulk orderbook is an indicator that investors can track for the longer run, as dry bulk ships generally take one or two years to construct.
Secondhand vessels are characterized by faster deliveries and thus reflect medium-term to short-term fundamentals.
Newbuild vessel prices indicate the future rates of Capesize, Panamax, and Handymax/Supramax vessels due to the long construction period.
According to customs data, iron ore exports from Brazil accounted for 18% of China’s overseas purchases in 2014 compared to 19% in 2013.
Shipments through Port Hedland represented 55% of Australia’s iron ore exports last year, and more than 80% of cargoes go to China.
China’s official purchasing managers’ index (or PMI) declined to 49.8 in January 2015 from its December 2014 levels of 50.1.
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