THE oil tanker market is currently in a strong position due to the oversupply of petroleum created by demand destruction from the impact of the coronavirus outbreak and by ramped up production from Saudi Arabia, a conference has been told.
"The cheaper the product we carry, the more demand there is for that product, and right now we are experiencing one of the strongest markets over the last ten years or more," Nikos Tsakos, chief executive of Tsakos Energy Navigation, told the 14th Annual Capital Link International Shipping Forum.
"The contango that we're seeing is one of the largest in recent memory," he said, adding that "we are expecting to see at these prices more storage, which will keep ships out of the market, keep the market strong".
Chief executive of International Seaways Lois Zabrocky underlined the reasons for the increased supply of oil and the corresponding drop in prices which have led to an uptick in the tanker market.
"We are seeing huge demand destruction in consuming nations all around the world and at the same time, we're seeing additional crude being pushed out primarily by Saudi Arabia," she said.
She believes that by April the world could be "awash with up to 20m barrels per day of excess crude" – a situation that will cause refiners to ramp down, with more oil – “double the amount” in recent memory – stored "on shore and at sea".
"This is something that we have not seen, certainly in the 25 years that I've been in the business," she said.
Still, she insisted that "our markets are very volatile" and that it's very important to have a "laser focus on the markets" to "tap" the opportunity currently being presented to shipping generally and tankers specifically.
While an oversupplied market serves the interests of the tanker trade, Mr Tsakos noted that the market is also improved by the fact that "right now no one in his right mind is building a ship".
Eventually, the oversupply of oil will decrease and tanking will gradually return to normal, he said.
"We will see a world where there is going to be 20% to 25% less demand of oil. However, at that time we will have even less vessels in the market because no one is building ships," he said.
"The normalisation in rates is not going to be a free fall,, he said, adding that "if we handle it well, it's going to be a normal good market".
"Right now where we are experiencing something which is out of this world. The party will last, I think, for six to nine months. But after that, it's up to us to pave the way for a long-term positive market," he said.
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