Global crude oil demand in 2022 moved up by a healthy 2.4% to 100 mbpd despite a decline in China’s oil demand with the country largely under Covid restriction through the year. The healthy growth in demand was equally driven by OCED and non-OECD (excluding China) economies in the post-pandemic recovery despite the fear of economic slowdown and a potential recession. North America, the Middle East and Asia (excluding China) accounted for nearly 79% of the demand growth in 2022.

• Europe’s attempt to reduce dependence on Russia in the aftermath of the conflict in Ukraine proved to be a boon for crude tanker companies as the changes in trade patterns boosted the demand for oil tankers in general and mid-size vessels in particular. Europe increased its imports from the US, Middle East and Latin America whereas the Russian barrels were directed to Asian market which resulted in surging vessel earnings. VLCCs were at the receiving end in 1H22 as changes in trade patterns largely benefited mid-size crude carriers at the expense of large crude carriers but the demand and earnings of VLCCs also picked up in the latter part of the year due to firm seasonal demand and recovery in Chinese demand.

• Healthy demand growth coupled with changes in trade patterns underpinned the robust growth in demand for crude tankers. Aframax laden tonne miles surged 25.5% followed by Panamax (11.7%) and Suezmax (10.1%). Laden tonne-mile demand for VLCCs moved up 6.2% and overall laden tonne miles for crude carriers jumped 9% to 11,917 billion tonne miles in 2022. As expected, crude tanker companies benefited substantially from the market disruption in 2022 with their TCE revenues surging amid favourable supplydemand dynamics. The TCE revenue of VLCC operator DHT Holdings jumped 29% whereas the topline of mid-size tanker operators such as Nordic American Tankers and Teekay Tankers surged 150%. The highest growth in TCE revenue was registered by International Seaways (234%) mainly due to the strong market and full-year impact of Diamond S Shipping’s acquisition

EBITDA of crude tanker companies spiked during the year as operating expenses increased slower than the growth in topline during the year. EBITDA of DHT Holdings jumped 53% to USD 197.5mn whereas Teekay Tankers’ EBITDA shot up nearly 80-folds. Suezmax operator Nordic American Tankers’ EBITDA stood at USD 86.6mn in 2022 compared to a negative EBITDA of 15.8mn in 2021. The average EBITDA margin of the companies jumped from 25% in 2021 to 63.5% in 2022.

• The year 2021 was challenging for crude tanker companies despite a surge of 6.7% in oil demand due to inventory drawdown amid tight supply and higher crude oil prices. The oversupply of ships also squeezed the earnings of crude carriers to below cash breakeven levels across vessel classes. As a result, crude tanker companies reported net losses during the year.

• However, 2022 proved to be a great year for crude tanker companies on account of the spike in demand and earnings of vessels. Healthy growth in oil demand and shift in trade patterns led to a jump in demand and TCE rates of crude carriers. Consequentially, many crude tanker companies reported results that were among the best in their history .

• In 2022, Frontline led the group of seven companies (mentioned above) with net income of USD 424.7mn followed by International Seaways with net income of USD 387.9mn. Teekay Tankers reported net profit of USD 229.1mn whereas Belgian crude carrier Euronav posted the net profit of USD 202.9mn. The lowest income among the group was reported by Nordic American Tankers (USD 15.1mn). As the companies preferred to prepay their debt and scheduled borrowings, the average leverage of the group improved from 89.7% in 2021 to 72.8% in 2022.

• It was a mixed bag on the dividend front. On the one hand Frontline resumed dividend payments while on the other Teekay Tankers preferred to strengthen its balance sheet. Euronav has maintained the policy of paying minimum dividend whereas Tsakos Energy Navigation, DHT Holdings, Nordic American Tankers and International Seaways increased dividends to transfer the benefits of higher profits to their shareholders
Source: Drewry Maritime Financial Research