However it seems that besides the oil market, tanker owners are bound to feel the pressure as well. In its latest weekly report, shipbroker Allied Shipbroking said that “at the start of the week oil prices were on a surge hitting their highest mark since July 2015 and Brent crude futures surpassing the US$ 62 per barrel mark. Many now see a further tightening of production levels with most seeing a stronger effort emerging form the world’s largest oil exporter”.
Allied said that “the Saudi Crown Prince Mohammed bin Salman’s planned reforms are starting to show face in the Kingdom, with part of these reforms being the planned listing next year of the state-owned oil company Saudi Aramco, along with major infrastructure projects for the modernizing of the countries image. Most see the sum of these moves as a dedicated action towards an increased target for crude oil prices, with large investments needed to be raised in order to fund most of these projects. The roundup of prominent royals, ministers and investors as an effort to crackdown on corruption is part of the clean sweep of the countries reputation, while the shakeup should help further boost investment prospects and help drive the economy which has been suffering from anemic levels of growth during this three-year market downturn. The higher oil prices and a better and more friendly and transparent image for business should also help the Aramco IPO”.
According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations “this sudden surge in prices however seems to have dealt a temporary blow to the freight market during its seasonal high, with freight rates from the Middle East Gulf weakening amidst slower interest and an excess of open tonnage in the region. This coupled with the overall slower activity being noted from traders in the Far East left the market in waiting. This should prove to be a temporary move and it is highly likely that the disruption is mainly as a temporary pause before traders get a real feel as to the clear direction things will take moving forward”.
Laaridis added that “taking a look however at a more forward view and the market difficulties keep rising, with the possible demand levels to be seen in the year ahead likely to be under squeeze as further production cuts take effect. There is however the possibility for a counter to these cuts by OPEC, with non-OPEC members likely to take up the opportunity and ramp up their production levels taking a share of the pie left behind. Beyond all this taking place, a general surge in the price of industrial commodities seemed to be the overall theme of the past week, with several other niche metals shooting up to multiyear highs as the overall sentiment got buoyed by the strongest and most widespread global growth figures since the financial crisis of 2008. This could be a partial sign that the commodity cycle appears to be turning and we may well see demand levels in general show healthier growth figures in trade in the years to come, though this should be taken with a pinch of salt as it should not be taken as a sign of the repeat of the so-called “commodities supercycle” that came to an abrupt end in 2011”.
Allied’s analyst concluded that “demand levels are looking good for crude oil moving forward and despite any dampening effect that may well be caused by the tightening of supplies and the prices hikes these may cause, the overall consumption growth especially from emerging markets in the Far East should still help provide a good level of growth in trade and likely an even better increase in tonne-mile demand. The herd-like optimism amongst investors may well be overshooting the markets potential but it still reflects the much better fundamentals now being noted in the market”, he concluded.