Low oil prices can’t stop the crude tanker boom
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Oil prices are in the doldrums but you wouldn’t know by looking at the crude tanker market. Not only are daily spot rates up, there is also a bull market for new-build orders. Shipbuilders are already busy dealing with orders for other types of vessels. Waiting lists are lengthening. This is resulting in a supply squeeze for oil tankers.
New-build values have responded. A price index for new-build tankers, across all sizes, has increased by 50 per cent since the fourth quarter of 2020, according to ship brokers Clarksons. The oil tanker fleet is also rapidly ageing. Currently the average is 13 years old. Assuming no scrapping of ships, this would rise to 15 years in 2026 — the oldest since the mid-1990s at least.
Lead times for new tankers have stretched to three years or more, well above the usual two years. Shipbuilding capacity is scarce. Most yards, whether in Korea or China, already have orders for liquefied natural gas vessels or dual-fuel containerships. New ones for crude carriers must wait.
Some shipowners predicted a potential shortfall a couple of years ago. Norwegian shipping billionaire John Fredriksen is one. In 2023, Fredriksen-controlled Frontline bought 24 very large crude carriers from rival Euronav for $2.35bn. New-build orders, at around 7 per cent of total fleet, are below the 10-year average of 11 per cent.
The looming shortage is also reflected in rising tanker spot rates. Rates for very large crude carriers — holding up to 2mn barrels of oil — jumped 37 per cent to $45,500 daily in 2023, estimates Pareto Securities. That should reach $62,500 in two years' time. The share prices of Frontline and fellow crude shipping group DHT have surged 33 per cent and 25 per cent this year.
Seaborne crude volumes which underpin tanker demand are yet to improve. At under 42 mn barrels daily through April, these are slightly below a year ago and remain down on early 2020 before the full force of the pandemic hit.
Even so, slow tanker speeds — partly due to environmental reasons and fuel costs — have kept more ships on the water and fewer available for loading, points out DHT’s chief executive Svein Moxnes Harfjeld.
As a result, tanker owners are making the most money since the late noughties. Those who bought or ordered enough tankers early enough have found their own gushers.
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