Moves by China to stockpile oil are providing a further boost to the tanker shipping market which is already buoyant due to global bargain-hunting caused by lower crude prices, shipowners said on Monday.
Rates for supertankers transporting 2-million-barrel cargoes of crude surged to record highs in late December of over $110,000 a day and have stayed close to $60,000 a day in recent weeks, helped by firm appetite for cargoes and a tight supply of ships available for hire.
China is expected to add 70-90 million barrels to its strategic crude oil purchases in 2016 as it takes advantage of low prices, a Reuters survey has shown.
“China still represents good value … and should supply a lot of additional demand,” Paddy Rodgers, chief executive of tanker owner Euronav, told a Capital Link shipping conference in Athens.
“The need for an SPR (strategic petroleum reserves) – essentially there is a real concern about what happens if there is a short-term shock and there is a no spare Saudi Arabiancapacity to meet it. That is the big issue. People are going to take security of supply seriously.”
China is the world’s second-biggest crude importer, importing 32.58 million tonnes (or around 8 million barrels per day) and challenging the United States for top spot.
Last week OPEC failed to agree a clear oil output strategy as Iran insisted on steeply raising its own production, though Tehran’s arch-rival Saudi Arabia promised not to flood the market and sought to mend fences within the organization.
“The fall in the price of oil has helped tanker demand and has helped tanker earnings significantly,” said George Saroglou, chief operating officer with Tsakos Energy Navigation.
“This OPEC overproduction has helped. You had more demand coming out and also you had more demand to store the cheap oil.”
Saroglou said in the first quarter of this year demand for tankers to transport crude was higher “than the historical average”. “Demand is on the rise this year,” he added.
Other tanker players said there was wider appetite for oil in other parts of Asia including India and Indonesia, which was also set to bolster tanker earnings.
“Demand in the East is going to go very well and has an upside,” Vassilis Kertsikoff, vice chairman with Eletson Holdings, told the conference.
“I don’t see many clouds and (tanker) supply is fairly okay.”
(Reporting by Jonathan Saul; editing by Adrian Croft)