Nothing to cheer from OPEC
Last week I mentioned that the market expected OPEC to extend its production cuts when it met last Thursday and it duly delivered: the capacity reductions that have been in place since January will continue for another nine months from 1 July. OPEC’s basket price nonetheless fell by a couple of dollars – nearly 5 per cent – to US$49.48 by Friday but as I record this video on Monday 29th of May, a slight recovery seems to be underway. I guess some profit taking played its part in the fall.
But what about the wider picture? Is OPEC’s decision good or bad for sentiment? On the day after OPEC’s meeting, the world’s largest shipbroker Clarksons published a short commentary but did not offer a definite view. The production cuts could – note that: ‘could’- affect tanker demand, either via lower crude and product exports – which account for 27 per cent of all seaborne trade, it said – or through reduced import demand, if the oil price rises as a result.
I don’t pretend to be an expert analyst but it seems to me inevitable that if there is less oil being produced there is less to be shipped, so I can see no optimistic signs for operators from last week’s decision – certainly nothing to justify any significant investment decisions in new tonnage.
Another area of interest for me is ballast water treatment and there has long been talk that the cost of installing equipment will be uneconomic for many older ships, dooming some of them to the scrappers. Again, I can see nothing from the OPEC meeting to affect the logic of that scenario.
This Thursday we will see data on US inventories, which have fallen for the past six weeks. If those are to be built up again, then tanker operators may expect some short-term business to result, but we need to take a long-term view as we track the fallout from OPEC.
Tanker Shipping and Trade will be watching this closely over the coming nine months.
But what about the wider picture? Is OPEC’s decision good or bad for sentiment? On the day after OPEC’s meeting, the world’s largest shipbroker Clarksons published a short commentary but did not offer a definite view. The production cuts could – note that: ‘could’- affect tanker demand, either via lower crude and product exports – which account for 27 per cent of all seaborne trade, it said – or through reduced import demand, if the oil price rises as a result.
I don’t pretend to be an expert analyst but it seems to me inevitable that if there is less oil being produced there is less to be shipped, so I can see no optimistic signs for operators from last week’s decision – certainly nothing to justify any significant investment decisions in new tonnage.
Another area of interest for me is ballast water treatment and there has long been talk that the cost of installing equipment will be uneconomic for many older ships, dooming some of them to the scrappers. Again, I can see nothing from the OPEC meeting to affect the logic of that scenario.
This Thursday we will see data on US inventories, which have fallen for the past six weeks. If those are to be built up again, then tanker operators may expect some short-term business to result, but we need to take a long-term view as we track the fallout from OPEC.
Tanker Shipping and Trade will be watching this closely over the coming nine months.
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