Tanker Market Outlook Enhancements
Jan. 25, 2018
With each publication of our annual outlook, we continue to incorporate enhancements based on our internal review and feedback from clients. This year is no exception and several enhancements in research, methodology and presentation have been included in the 2018-2022 Tanker Market Outlook.
The concept of real-time demand, supply and utilization analysis was introduced in our 2017 Tanker Market Outlook, but has since earned its own section in the 2018 Tanker Market Outlook. In the Tanker Market Technicals section, we look at vessel demand and supply statistics basis ton/days, subsequently used to display vessel utilization and the relationship with real market earnings.
We capture OECD and non-OECD country bilateral trade flows through continued collaboration with clients and other parties, as well as use of other industry datasets, enabling us to exceed 95% coverage of trade flows. In addition to the continuation of these efforts, we have enhanced vessel demand data for European land-locked countries with access to neighboring country ports.
This year’s Tanker Market Outlook features an enhanced long-term delivery forecast methodology, which we initially introduced in the 2017 Mid-Year Update. This new method allows us to utilize regression analysis of historical fleet additions to forecast future deliveries in conjunction with the current order book, giving the reader a more accurate view of market behavior in the outer years of our forecast. These forecast are further adjusted to reflect observed demand/supply ratios across the various tanker segments.
We have also enhanced our expectations for future fleet removals. Previously, in our reference case, all vessels reaching their 20th and 25th year of existence were removed from the fleet; however, now we factor in historical deletion patterns and apply corresponding ratios to each sector in order to gain a more refined view of fleet evolution.
In Section 7 “Tanker Market Outlook” we are pleased to include a guest authorship by JBC Energy on the topic of crude pricing. We have a long-standing relationship with JBC Energy including the exchange of data services in order to better enhance our mutual understanding of product balances and trade flows on both a regional and global basis for refined products and crude oil.
In response to the continued growth of Middle East crude flows into Europe we added the Suezmax AG / Med route to our forecast. We have also replaced the benchmark TD3 route with TD3C. TD3C represents the VLCC trade AG/China (Ras Tanura/Ningbo) basis 270,000 mt.
In order to expand our global coverage of the LR sector we added two LR2 trades and one LR1 trade to our forecast alongside one triangulated earnings forecast for both sectors. The LR2 routes are AG / UKC and Med / Japan, which are also combined to provide us our LR2 triangulation. For the LR1s, we have added the South Korea / Singapore route to complete the TC5 / Korea / Singapore triangulation.
In the 2018-2022 Tanker Market Outlook, we continue to provide five-year forecasts for 1-year and 3-year time charter rates for the various tanker sectors. We believe this will help improve clients’ visibility into the future earnings market and enhance decision making regarding coverage strategies.
During last year’s Tanker Market Outlook series, our overall forecast performance was within 6.4% of actual market levels on an absolute basis. During the year, we kept our front end forecasts very similar to previous expectations; however, we tweaked the back end of our forecast on the basis of updated ton-mile demand projections and enhancements to our long-term delivery and vessel deletion methodologies.
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