& TANKER MARKETS 2H 2020: Charting the course ahead August 12, 2020
Your presenters Arthur Richier Anoop Singh Senior Freight Analyst - Vortexa Regional Head of Research - Braemar ACM 2
Introduction to Vortexa An analytics provider for the oil & gas industry. Produces real-time, global detailed waterborne cargo flows. Blends AI driven models and human intelligence Used by analysts, physical traders, financial players, consultancies and PRAs to get forward-looking market view. 3
Introduction to Braemar ACM • Chartering • Transactions & capital raising • Sale & purchase • Restructuring • Freight derivatives • Asset and loan management • Valuations • Insolvency advisory • Research • LNG services • Vessel design • Commissioning supervision 1 • Port agency • Hub agency Adjusting & Marine surveys • • Liner agency Offshore energy marine warranty services (MWS) • • Logistic services Expert witness & consultancy • Salvage and wreck removal • 4
Agenda • • • • • 5
Key Messages The tanker freight market went Unique market conditions that led Demand will take time to recover from boom to bust as ton-mile to a floating storage bonanza were to pre-COVID levels and in the demand collapsed with recovery not sustainable in the long-term and meantime, may continue to fall now an uncertain prospect across were unable to maintain rates at further in specific regions with tanker classes yearly-highs with all eyes now on the China and the US remaining key drawing down of inventories influences across both stock draw-downs and imports 6
Markets are off their highs, with FFAs regaining some strength Spot Earnings FFA - VLCC TD3c Q1-21 Q2-21 Bal Q3 20 Q4-20 VLCC – TD3c MR – Atlantic Basket $k/day $k/day 40 350 300 35 250 30 200 25 150 20 100 15 50 0 10 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 12-May-20 27-May-20 11-Jun-20 26-Jun-20 11-Jul-20 26-Jul-20 10-Aug-20 7
Ton-mile demand across benchmark routes MR UKC – USAC VLCC -7% North Sea – China -68% LR2 MEG – Japan 19% Suezmax WAF – UKC -35% 8
Global crude and refined products arrivals Dirty (bpd) Clean (bpd) Crude/Condensates (bpd) Seasonal -12m 100 90 -10% 80 70 Mn Bpd 60 50 40 30 20 10 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 9
A long road back to recovery in oil demand loss from the Covid-19 pandemic Global oil demand Oil demand outlooks m b/d Current forecast (IEA and Braemar ACM) pre-covid IEA m b/d 105 110 99.8 99.1 100 97.7 97.4 96.1 94.9 105 95 92.9 91.9 91.7 90.2 100 88.9 88.3 90 87.1 86.3 85.6 85.5 84.7 95 83.3 85 80.2 78.7 90 80 77.9 85 75 70 80 2019 2020 2021 2022 2023 2024 2025 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 10
Floating storage: when does the ‘great unwind’ happen ? Global crude floating storage (mn bbl) Global crude stockbuild from start of 2020 (mbbls) 250 crude in floating storage (>7 days) global crude stock change since Jan 2020 (LHS) 200 1,000 180 900 160 800 140 150 700 120 600 100 100 500 80 400 60 300 50 40 200 20 100 0 0 0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Asia Europe North America Others China Assumes production in Libya does not recover and Venezuela remains at 0.4m b/d 11
Refinery runs to recover to 2019 levels in the East of Suez by mid-2021 with crude imports likely to be slower to recover Refinery throughput - Asia ex Middle East Select East of Suez crude imports (m b/d) (m b/d) 5-year range 2019 2020 North Asia (Ch/Jp/Kr) India (RHS) SE Asia (RHS) 5-year average 2020 forecast 2021 forecast 32 31 16.0 5.0 30 15.0 4.5 29 14.0 4.0 28 13.0 3.5 27 12.0 3.0 26 11.0 2.5 25 24 10.0 2.0 9 9 9 9 0 0 0 0 1 1 1 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1 1 1 1 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - - - - 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q 12
Decline in West of Suez refinery throughput accelerated by the Covid-19 pandemic Refinery throughput - Europe + Americas West of Suez Crude imports (m b/d) (m b/d) 5-year range 2019 2020 Europe North America (RHS) 5-year average 2020 forecast 2021 forecast 13.0 4.5 36 34 12.0 4.0 32 11.0 3.5 30 28 10.0 3.0 26 24 9.0 2.5 22 8.0 2.0 20 9 9 9 9 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - - - - 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q 13
There is more to fleet growth than orderbook and ageing fleet Uncoated tanker fleet development Dirty trading tanker fleet growth Panamax Afra Sz VL Headline fleet growth Active fleet growth # of vessels m dwt 160 80 orderbook Scrubber r’fitting = 9% of 70 140 Floating storage 7% of fleet fleet Sanctions and arrests 60 120 50 100 On order 40 80 30 60 20 40 10 20 0 0 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - - - - - - - - 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 14
Dirty tanker supply and demand do not balance before 2022 Quarterly dirty tanker tonne-miles and cargo volumes Annual dirty tanker demand and supply growth Tonne-miles (LHS) Crude imports (RHS) Base demand growth Active fleet growth 10% m b/d billion 860 41.0 8% 850 40.5 6% 840 40.0 830 39.5 4% 8.1% 820 39.0 4.9% 2% 810 38.5 2.3% -0.6% 1.7% 1.7% 800 38.0 0.5% 0% -0.9% -0.3% 790 37.5 -2.3% -2.8% -0.6% -2% 780 37.0 770 36.5 -4% 9 9 9 9 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - - - - 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q 15
Summary High stocks will delay a recovery of Active fleet will grow much faster With demand well below year-ago demand from translating into a than the suggested headline levels and supply likely to be recovery in tanker freight markets numbers larger as floating storage unwinds, the seasonal winter freight spike is likely to be capped this year 16
Questions? 17
Thank you Arthur Richier Anoop Singh arthur.richier@vortexa.com anoop.singh@braemar.com
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