With eyes on the Middle East once again is shipping as another headache comes to add to the already geopolitical uncertainties due to the Russian-Ukrainian conflict facing the industry.
The tragic events in the Middle East have opened the bag of Aeolus in a sensitive area that does not directly, for now, but indirectly affects international shipping and mainly the first level tanker market.
Israel, as noted by shipping brokers who follow the developments closely, is not an oil producing country nor does it have refineries that affect the international maritime oil trade. So it is still too early what this conflict means for the tanker industry. But a more general flare-up in the region, possibly involving Iran and Saudi Arabia, which have a dominant role in oil production and therefore trade, will create new data that cannot currently be recorded. It should also not be forgotten that a large part of the quantities of oil pass through the Straits of Hormuz.
The US attitude
In shipping, what they are watching, among other things, is the attitude of the US towards Iran, which is under an embargo, but which in recent years had relaxed it, thus strengthening its presence in the global oil trade.
Also questionable is what Saudi Arabia will do, which has a dominant role in OPEC’s production decisions. Both countries are important suppliers to China, which currently supports the tanker freight market as an importer.
So far in 2023, Vortexa data (https://www.vortexa.com) shows that China’s seaborne crude oil imports have averaged about 10.4 million barrels per day. That’s about 1.4 million barrels per day more than the 2022. However, in 2023 Saudi Arabia is still the largest exporter of marine oil to China at 1.66 million barrels per day, followed by Russia at 1.44 million barrels per day. At the same time as Iran increases exports, China has expanded imports of Iranian crude from 560 thousand barrels per day in 2022 to 845 thousand in 2023, while in recent months according to Poten Iranian exports to China have exceeded 1, 0 million barrels per day.
Oil prices
In the shipping industry, they also closely monitor the course of oil prices, as a very large increase in its price will limit consumption and thus maritime trade. In this case, the entire shipping industry will be affected as high oil prices mean braking of the international economy with obvious effects on sea freight.
However, what they know well in shipping is the other side of the story, that is the supply of tankers, which is a factor that determines the course of freight markets. The crude oil tanker fleet is expected to grow by 2.0% and 0.4% in 2023 and 2024 respectively. Contracts for crude oil tankers have remained sluggish and the order book remains low at just 3.7% of the merchant fleet size. Therefore, new ship deliveries will remain low for the next period. However, no crude tankers have yet been recycled in 2023 and we expect recycling to remain low for the remainder of the year as well as through 2024.
As of September this year, transport tankers were traveling marginally faster than during the same period in 2022, by almost 3.6%. However, the expected decrease in sailing speed during 2024. Broadly estimates crude oil tanker supply growth to be 4.0% and -0.6% for 2023 and 2024 respectively.
