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Is the Crude Oil Tanker Supply Posing a Problem?

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Fleet growth

According to the Charles R. Weber tanker report, as of May 22, 2016, the number of VLCCs (very large crude carriers) in the world is 654. This is an increase from 640 at the start of the year. The Suezmax fleet also has increased by two to total 440.

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Orderbooks

An orderbook tells us how many ships have been ordered and how many are under construction. A very heavy orderbook can pose a demand-supply imbalance, which may put pressure on crude oil tanker rates. On the other hand, if the newbuild supply is short of the increasing demand, this may give a push to tanker rates.

Assessing the crude oil (DBO) tanker industry orderbook is important in order to determine the outlook of companies such as Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), Euronav (EURN), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).

Expected fleet growth in 2016

According to the Charles R. Weber tanker report, 38 VLCCs will be delivered in the rest of 2016. Seven VLCCs are expected to be scrapped. The expected net fleet growth is 4.7% of the current fleet of 654.

Similarly, 29 Suezmax vessels are expected to enter the market in 2016, and ten are expected to be scrapped. The expected net fleet growth is 4.3% of the current fleet of 440 Suezmax vessels.

VLCC’s orderbook is heavier than Suezmax’s. The expected total fleet growth for 2016 stands at 4.5%. These deliveries are mostly scheduled in the second half of 2016. This will put pressure on tanker rates in the second half of the year.

Next, let’s see what crude tanker prices tell us about the industry outlook.

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