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Reports from the Red Sea indicate no progress towards de-escalation

Reports from the Red Sea indicate no progress towards de-escalation. Houthi rebels continue targeting ships with drone missiles and recently claimed to possess a new hypersonic missile. The Houthis' leader, Abdul Malik al-Houthi, threatened attacks on ships traveling towards Africa's Cape of Good Hope, potentially disrupting east-west maritime traffic. The extent of the Houthi threat and their capability to counter the US and its allies remains unclear.

The International Energy Agency (IEA) hiked its 2024 oil demand forecast by 110,000 b/d to 1.3 million b/d, citing a stronger US economy and increased fuel use by ships rerouted due to Red Sea attacks. While global onshore oil stocks remain at their lowest since at least 2016, detours around the Red Sea have led to a rise in oil stockpiles held on ships. The IEA also downgraded its 2024 oil supply forecast by 930,000 b/d to 102.86 million b/d, citing both extended OPEC+ production cuts announced in March and earlier disruptions to Canadian output caused by cold weather.

Middle Eastern diesel exports to Europe surged to a two-month high of 374,000 b/d in February, up from 318,000 b/d in January. Saudi Arabia and Kuwait led the surge, with Saudi Arabia becoming the top exporter at 192,000 b/d in February, up from 169,000 b/d in January and Kuwait's shipments more than doubling to 114,000 b/d from 55,000 b/d over the same period. Also February marked the first time since August 2023 that Egypt shipped diesel to Europe. Since the EU's ban on Russian oil products in February 2023, Europe has become heavily reliant on Middle Eastern and US diesel imports. Africa and Latin America, meanwhile, have absorbed much of the displaced Russian oil products, including any European surplus. A key question now is whether recent drone attacks on Russian refineries will curtail their diesel exports. This could prompt African and Latin American countries to seek alternative sources from the Middle East and the US, potentially tightening diesel supplies for Europe.

In the tanker sector, the orderbook-to-fleet ratio (by number of vessels) currently sits at 8.7%. While this is nearing the levels of 2020 and 2021, it remains almost 40% below the average orderbook-to-fleet ratio observed between 2014 and 2019.Despite a strong start to 2024 with nearly 67 tanker orders placed year-to-date, the tanker market needs more orders. Nearly 50% of the active tanker fleet consists of vintage vessels (16+ years old). The VLCC sector has the most serious aged fleet issue compared to other tanker segments. Here, a total of 269 vessels (30% of the VLCC fleet) are older than 16 years old, with only 37 new VLCCs currently on order (4% orderbook to VLCC fleet ratio). Notably, 31 of these new VLCCs are scheduled for delivery in 2026 and 2027. The tanker fleet growth (in DWT) was about 2 % in 2023. Our predictions based on the orderbook and the assumption of about 7.3 mill DWT in yearly demo (based on the average of the last 10 years - since 2013) are that the fleet growth will be 2024: 0.02%, 2025: 1.7%, 2026: 1.8%.

The International Energy Agency's (IEA) March 2024 forecast paints a clear picture: a better crude and product oil market in terms of supply and demand for the foreseeable future. This along with the tight tanker fleet growth for the coming years, translates to robust fundamentals for the tanker market, fuelling optimism among investors and owners.

S&P Activity:

Dry:

Capesize and Supramax vessels had the lion's share in this week's SnP transactions with 11 sales in total. Pan Ocean made an impressive transaction, acquiring three scrubber-fitted Newcastlemaxes all built in SWS: the "Atlantic Tiger" - 209k/2020, the "Atlantic Lion"- 209k/2020, and the "Atlantic Dragon"- 209k/2020 for USD 71 mills each. Chinese buyers through an enbloc transaction bought for USD 47 mills in total two scrubber fitted capesizes the "Genco Claudius" – 169k/2010 Sungdong and the "Genco Maximus" – 169k/2009 Sungdong. Kamsarmax "Key Guardian" – 83k/2011 Sanoyas was sold to clients of Itiro for USD 23.7 mills while the "Maria G.O." – 87k 2011 Hudong Zhonghua was sold for USD 17 mills. In the Panamax size, the Ice classed 1C "Xi Long 18" – 79k/2013 Jiangsu Eastern was acquired by Chinese for USD mid 17 mills and the "Sterling Tora" – 79k/2010 Jinhai Heavy was sold for USD 14.25 mills. Supramax "Thetis" – 58k/2013 Zhejiang was sold for USD 17.5 mills, the "Hony World" 57k/2012 Xiamen was sold for USD high 14 mills while the Hyundai Vianshin Ice Class 1A duo "Arkadia" 56k/2012 and "Kumpula" – 56k/2012 were sold enbloc to HGF Denizcilik for USD 37.1 mills. Finally, the handysize "Condor Hamburg" 31k/2012 Fujian was sold for mid/high USD 11 mills, while the "BBC Pluto" 37k/2010 Tianjin Xingang was sold to Turkish buyers for USD 11.6 mills.

Wet:

This week the activity at the Tanker SnP market was subdued as there are only three new transactions. The "High Prosperity" – 48k/2006 Iwagi was acquired by Singaporeans for USD 19.25 mills, while the ice classed 1B "Acadia Trader" – 38k/2004 STX was bought by undisclosed buyers for USD 15.5 mills and the "MTM ST Jean" – 34k/2003 Shin Kurushima was sold for USD excess 18 mills.

Xclusiv Shipbrokers Inc.