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Intertanko Energy and Tanker Market Review March 2005. Overview . Energy Market Overview Crude Oil Supply/Demand Outlook Tanker Market General Market Trends Emerging Trade Patterns VLCC Analysis Summary/Conclusions. Oil Supply Summary. - PowerPoint PPT Presentation
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IntertankoIntertanko
Energy and Tanker Market Review Energy and Tanker Market Review
March 2005March 2005
2
Overview Overview
• Energy Market Overview• Crude Oil Supply/Demand Outlook
• Tanker Market General Market Trends • Emerging Trade Patterns• VLCC Analysis
• Summary/Conclusions
3
• Not growing fast enough to meet current and future demand
• OPEC currently producing near its maximum
• Little spare production capacity
• Supply Disruptions• Hurricane Ivan disrupted US Gulf Coast offshore• Strikes, insurgency in oil producing countries• Summer crude supply reductions for Alaskan crude on USWC
Oil Supply SummaryOil Supply Summary
4
• Overall world energy demand is growing
• Oil is the largest source of energy and is projected to have highest growth over next several decades
• Transportation fuel demand growing
• Energy demand is mostly in the industrialized nations• Concentrated in the US, Europe, and Japan
• Developing nations have the highest growth rate in demand • India, China
• Higher quality products required• Low sulfur contents
Oil Demand Summary/OutlookOil Demand Summary/Outlook
5
Emerging Tanker Regulation Trends
• IMO/Marpol Single-Hull Phase-Outs
• All non-SBT vessels to be scrapped by April 2005• All other Single-Hull vessels to be scrapped by 2010• All Double-Sided and Double-Bottom vessels to be scrapped by their
25th Anniversaries • These regulations are subject to enforcement by the countries
controlling the individual ports.
• IMO/Marpol Ban on Transport of Heavy Grades of Oil
6
China: The Waking Giant
• Estimate China’s growing oil consumption has increased VLCC demand by equivalent 31 vessels over the past 18 months
Oil Production and Consumption in China
1600
2800
4000
5200
6400
1980 1985 1990 1995 2000
000
Bpd
ProductionConsumption
Net Exporter
Net Importer
7
The World Tanker MarketThe World Tanker Market
• Tanker owners today are enjoying record profits due to a series of events:
• Increased demand for crude oil and refined products• Robust economic growth in China, India and elsewhere• Political dynamics in key countries • Regulatory changes
• Fuel substitution is a long-term threat to traditional tanker owners
• Natural Gas• Coal• Nuclear
• Shipyard capacity can lead to overbuilding – depressing rates for years to come
8
Tanker Market Summary
• Vessel spot market earnings the past 12 months have been considerably higher than long-term historical averages
10 YEAR AVG 12 MONTH AVG % CHANGE
VLCC (AG-USG) $34,658 $68,647 + 98.1 %
SUEZMAX (WAF-USG) $30,127 $57,345 + 90.3 %
AFRAMAX (CAR-USG) $21,962 $34,873 + 58.8 %
PANAMAX (CAR-USAC) $19,234 $29,857 + 55.2 %
9
Evolving Trading Patterns: Yesterday Evolving Trading Patterns: Yesterday
• VLCC trade depended heavily on AG crude exports 15 years ago
8
21
December 1989 VLCC Movements
410
64
2
2
321
3
2
1
15
2
10
8
76
February 2005 VLCC Movements
84
18
134
38
5
10
3
6
3
312
3
49
23
1 1
1
1
1
1
1
1 2
21
3
1
2
Today’s question:Today’s question:What’s a backhaul cargo?What’s a backhaul cargo?
• Today the VLCC crude trade patterns are larger, more diverse and require a global operation to support activities
11
Tanker Rates vs. OPEC ProductionTanker Rates vs. OPEC Production
• VLCC rates and OPEC production closely tied and both vary widely. EIA data shows that current worldwide crude demand of 85 mbpd is up 6.0 mbpd from 18 months ago
0
30
60
90
120
150
180
210
240
270
300
330
Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04
WS
23,000
24,000
25,000
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
000
BPD
AG - Far East
OPEC Production
OPEC Production Through February 2005
12
Monthly Average AG VLCC Spot Market Liftings
• Estimate that overall VLCC demand is up 75 ships from 2002 levels. The AG is providing about 70% of the demand increase with West Africa the balance
0
20
40
60
80
100
120
2002 2003 2004 YTD 2005
Aver
age
Fixt
ures
13
VLCC Spot vs. Timecharter
• Depending on timing, the average spot market rate has been a more expensive option for owners over the past five years
0
30,000
60,000
90,000
120,000
150,000
180,000
210,000
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05
$/Day
Time Charter - 1 Year Time Charter - 3 Year AG - Far East (TCE)
Jan 2000 - Feb 2005 Averages
$38,563 : Time Charter - 1 Year$34,627 : Time Charter - 3 Year$47,015 : 260 kt AG - Far East (TCE)
14
280kt AG-USG VLCC Cost per Barrel
•VLCCs are currently almost three times more expensive per barrel now versus 2002 averages.
VLCC - AG/USG 280kt
0.000.501.001.502.002.503.003.504.00
2002 2003 2004 Current
$/BB
L
4.6% 6.9% 8.3% 7.9%
15
- Significant number of deliveries (170) over past 4 years has led to a fairly modern fleet
- Similar number of removals over past 4 years (175) has kept fleet size roughly equal
- Only 11 vessels are more than 20 years old
AGE PROFILE V/ULCC FLEET443 Vessels as of February 2005
<10 = 56%
10-20 = 42%
>20 = 2%
051015202530354045
1979 1984 1988 1992 1996 2000 2004 2008Year Built
16
VLCC Market Summary• Increased crude demand and more complex trading patterns have increased overall
VLCC demand• China, India and US will remain key to demand growth
• Fleet supply has been steady for the past four years with scrapping roughly equal to delivery.
• Fleet has been just barely able to meet significant increase in demand in past 18 months.
• Sizable orderbook:• 2005-2008 – The fleet will begin to increase as limited number of vessels to scrap• But 2010 phase-out schedule suggests that more vessels will be needed
• Most analysts are bullish on the tanker market in the short-run• Market participants that have taken long positions over the past 18 months have been correct
17
Long-Term Tanker Market OutlookLong-Term Tanker Market Outlook
• Despite some expected new locations for crude sources, the major trading patterns for crude oil are unlikely to change much in the next 10 years
• Impact of new refinery capacity can have unintended consequences on the tanker market:• For example, India is now a major importer of crude instead of refined
products
• Fuel substitution is a long-term threat to traditional tanker owners• Natural Gas• Coal• Nuclear
• Shipyard capacity can lead to overbuilding – depressing rates for years to come
18
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