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The downward trend

The downward trend and volatility in the oil markets continues as WTI crude futures traded near USD 70 per barrel on Monday after declining for four straight weeks. This price is about 16% lower month-on-month and more than 23% lower since 15 May 2022. Fears of a US economic slowdown and a slower-than-expected recovery in China weighed on the demand outlook. The latest data from the US, showed that consumer sentiment fell to a six-month low in May and inflation expectations for the next five years were the highest since 2011 while investors constantly monitor key economic data from China to gauge the sustainability of the country’s recovery from the pandemic slump. On the production side of the oil market, OPEC and 10 other countries outside the group in the OPEC+ are trying to achieve balance between supply and demand. Energy brokers comment that the 23 alliance members are willing to do whatever necessary to achieve supply and demand balance and stabilize the oil markets. Iraq and seven more members of OPEC+ have decided to implement a collective voluntary cut of 1.657 million b/d from May 1 until the end of 2023. This measure is on top of OPEC+ reduction of 2 million b/d that started in November and will be carried through till the end of 2023 in an effort to support crude oil prices. Next OPEC+ meeting will be held between June 3-4 in order to review production policy, give support for a tighter market in the second half of the year and face production problems of its members. Iraq , OPEC's second biggest producer, has lost 500,000 b/d due to the continued suspension of Iraqi oil exports via Turkey's port of Ceyhan since March 25. On the other hand, Russia has managed to hold its production steady at about 9.60 million b/d despite the western sanctions as most of its western customers have been replaced by Asian and African ones.

Moving from the oil market to the tanker fleet, the tanker fleet (>= 10,000 DWT) is in danger of shrinking in the near future mainly because of the low order book, which stood at its lowest point since 1996 in February 2023 and because about 34% of the active fleet is older than 16 years. As of our April’s fleet data, the total tanker active fleet is 7,481 vessels, with modern vessels (0-10 years old) constituting the biggest part of the fleet (36.5%), followed by the 16-21+ years old category (that as we mentioned before) accounts for 34%, while the vessels of 11-15 years are 29% of total tanker active fleet. Within the next 32 months the active fleet will grow only by 1%, as 348 newbuilding vessels will enter the total tanker fleet and assuming that 270 vessels will go for scrap (an average of 90 vessels per year based on yearly data since 2003). As a result, by the end of 2025, the aged tankers (16-21+ years old) will have shown a significant increase and will consist of 48% of total tanker active fleet. On the other hand, the modern tankers (0-10 years old) will decrease by around 2.3% to 2,695 ships during the same period. More specifically, focusing on the VLCC and Suezmax sectors, with the last time an order was placed for the former was in August 2022 (Based on April 2023 data), we witnessed a negligible growth by the end 2025. During the next 32 months, 13 newbuilding VLCC will be added to the total active fleet. However, 25 VLCC vessels may be broken up (although today’s freight rates for such vessels will of course sway owners against scrapping), as based on demolition data of the last 20 years we highlighted an average of 8 VLCC’s to go for scrap per year. In other words, the VLCC segment may be decreased slightly by the end of 2025. On the Suezmax sector, we expect to remain to almost the same numbers as now, as 23 new vessels are going to enter the tanker active fleet, while we estimate 18 Suezmaxes (with an average of 6 vessels per year based on the last 20 years Suezmaxes that went for scrap) to be demolished.

Sale and Purchase:

The activity in the dry bulk market was very firm this week, with 16 vessels changing hands and vintage Capesizes playing a vital role in this week’s momentum. Clients of Jiangsu Steamship acquired the Capesize “Tasik Melati” - 180K/2004 Koyo for very high USD 15 mills. Moreover, on the same sector, Dubai based buyers acquired the “Olympius” - 171K/2004 Hyundai Samho and the “Victorius”- 171K/2004 Hyundai Samho for region USD 17 mills each, while the “Zheng Yuan” - 178K/2002 Mitsui was sold for USD 13 mills to Chinese buyers. Moving down the sizes, the Kamsarmax with Electronic M/E “Sea Proteus”- 82K/2013 Wuhu Xinlian, the “Sea Pluto” - 81K/2013 New Times and “Sea Venus” - 81K/2013 New Century were sold enbloc for USD 70.5 mills. The Japanese built Panamax “Ultra Panache” - 78K/2011 Sanoyas was sold for region/excess USD 20 mills to Greek buyers. Last but not least, the Handysize “Pacific Island” - 38K/2012 Shimanami changed hands for region USD 18.3-18.4 mills.

On the tanker S&P activity, 15+ years old vessels continue to be buyers’ preference across different sizes. On the Suezmax sector, the “Agape Soul” - 159K/2001 Daewoo reported sold for USD 29 mills. The highlight of this week was the sale of the modern Scrubber fitted Aframax “Southern Glory”- 108K/2019 Tsuneishi for region USD 68 mills. On the same sector, UAE buyers acquired the “Aframax Riviera” - 107K/2005 Koyo for USD 35 mills. On the MR2 sector, the “MTM Hudson” - 51K/2004 STX found new owners for excess USD 18 mills. Finally, 4x Chemical Carriers, the “Super Forte” - 13K/2010 STX, the Ice Class 1A “Super Infinity” - 15K/2009 STX Ro, the Ice Class 1A “Super Hero” - 15K/2009 STX Ro and the “Super Eastern” - 13K/2009 STX were sold enbloc for USD 9 mills each.

Xclusiv Shipbrokers Inc.