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What should tanker owners look out for?

What should tanker owners look out for?
Tanker owners have to consider once again the “Iran” factor, since a potential agreement to end sanctions on the Middle Eastern country, could once again create a new dynamic in the oil market.

According to the latest weekly report from shipbroker Gibson, “the debate on a possible deal over Iran’s nuclear program has once again raised its head above the parapets. Iran, having failed to meet any previous deadlines to conform with international demands to disclose details of its nuclear program, may be on the brink of brokering a deal with the US, to ease economic sanctions against the state. The Iranian government is anxious to seal a deal which could be concluded as early as the end of March”.
The shipbroker added that “Iran is keen to resume crude oil exports as quickly as possible as the recent fall in the oil price has impacted heavily on their already limited ability to export crude. The nation is desperate to get back its pre-sanction market share as quickly as possible. International pressure has forced several nations to cut their dependency on Iranian imports, significantly India which has not taken any NITC VLCC cargoes since November last year”.
According to Gibson, “of course the impact of any such agreement could immediately release millions of barrels of crude currently being stored on the NITC floating VLCC flotilla anchored off the Iranian coast. Iranian crude released into the market, according to Reuters could potentially very quickly double the estimated global supply surplus. Fears over any resumption of crude production following any release from the shackles on Iran, can only push the oil price even lower which will heap further pressure on all producers. However, following any initial surge in the release from floating storage, it is considered that Iran would be unable to resume pumping to anywhere near pre-sanction levels despite recent claims by the Iranian Oil Minister that exports could rise from existing levels, by 500,000 b/d within six months. In reality most analysts feel any immediate uptick in supply would be difficult to achieve given the lack of maintenance over the duration of the sanctions and the new investment required. Already several OPEC members have voiced their concerns as low oil prices continue to bite heavily into their revenues. According to one source, Venezuela, Nigeria, Iran and Libya have already requested the organisation to cut production to boost the oil price ahead of the next scheduled OPEC meeting in June. Other Non-OPEC producers have also come in with backing for this initiative and would not welcome the added imposition of increased Iranian production”.
Gibson added that “so, any deal with Iran is not a ‘done and dusted’ deal as there are many players who have a vested interest to keep Iran outside of the fold, this will add more pressure on negotiations. Sanctions may also be lifted in stages which would again delay a quick resumption of crude exports. Restrictions on insurance, banking and other embargoed products remain in place. Since the beginning of February, we estimate that 15 NITC VLCCs are anchored off the Iranian coast believed to be employed in storage with another 9 units currently bound for China and 2 others destined for Korea. NITC are the largest individual owner of VLCC tonnage with 37 Units”.
Meanwhile, in the tanker market this week, in the Middle East, “a greater than anticipated March VLCC programme gave Owners some encouragement here, but that was quickly undone as discounted levels were seen for a preferred AG/South Korea voyage. Initial fears of a further slide were quickly abated though when reports of levels in excess of ws 50 on 270,000mt were seen, albeit for short Eastern voyages. Interest West kept to a minimum with last done being reported at ws 26.25 on 280,000mt via the Cape. Suezmaxes have been picked off on the first decade of the April programme, but all this has demonstrated is the flat nature of the market as there remains sufficient tonnage to keep rates at around 140 x ws 42.5 for voyages West and 130 x ws 87.5 for East. Aframaxes have seen some sustained enquiry this week and with a tighter Far East list, therefore constraining the amount of ballasters to the AG, we should see rates stay steady with a small chance of the rates threatening to move from 80 x ws 112.5 for AG/East”, said Gibson.
It added that in the North Sea, “this week has seen a steady amount fixing for Aframxes in Baltic and some interest in the North Sea. With a lack of cargoes due to the larger ships swallowing up the stems, levels remained unchanged for North Sea, rates finishing the week where they started 80,000mt by ws 95. In turn the Baltic list constricted for the ice class which saw the end March and early April dated cargoes get tricky to cover, rates tick up slightly from 100,000mt by ws 77.5 to 100,000mt by ws 80. VLCC Arb levels fell further through the week putting it very nearly out of play for the majority of Owners here. Workable levels currently stand at around $4.35 million for Rotterdam to Singapore”.

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