The week ends with bunker prices rising in major ports, while the brent crude price is still below $100/barrel for the first time since October 2011. At the end of last week, IFO 380 bunker fuel closed below $600/ton in Singapore, Fujairah and Rotterdam, marking the first time bunkering costs falling below $600/ton since February 2011. The low cost of bunkering provides a comfort to crude tanker operators who are still facing weak freight rates.  OPEC, which supplies 40% of the world’s crude, normally responds to a sharp drop in prices by curbing production, but Saudi Arabia’s current policy objective is to prevent crude price from rising to more than $100/barrel in order to mitigate the risks of the high oil price that posed to the global economy.

OPEC’s oil surplus in an attempt to cushion the impact of US and EU efforts for imposing sanctions on Iranian oil exports drove brent prices to record lows from the highs seen, excess $120/barrel, during the first quarter of the year. According to OPEC’s oil market reports, the group’s monthly crude output has exceeded 31milion barrels/day for much of this year. Estimations by the International Energy Agency show that OPEC production in May stood at 31,87million barrels/day, 1,4m barrels/day higher than December and 2,8 million barrels/day more than May 2011. The increase is driven by Saudi Arabia with its country’s oil Minister, Ali Naimi, stating this year that he wants oil price to be in the region of $100/barrel. Gulf Oil Review showed that Saudi Arabia supplied the market with 9,9 million barrels/day in May, the highest level seen for this year. Although oil prices have dipped below double digit figures, OPEC’s president made clear that new individual quotas for countries are unlikely to be agreed as long as the prospects of sanctions on Iran exist.
OPEC has officially agreed in Viena on June 14 to retain its current 30 million barrels/day crude output ceiling as a response to any threats to oil market stability, while the next meeting is scheduled for December 12th. Iranian oil minister Rostam Ghasemi, speaking just before the formal talks, said adherence to the 30 million b/d ceiling could balance the market and restore oil prices to a $100-$120/b range.
The lower fuel cost is a positive factor for the beleaguered tanker operators, but the weak freight market environment has not returned yet in euphoria. The prosperity of crude tanker segment is heavily dependent on China and US oil demand, when eurozone sovereign debt crisis has overshadowed economic growth curtailing oil demand. China remains the lying factor behind more intensive demand for very large crude carriers as crude imports into China hit 6m barrels/day in May, up by 18% from the same month last year, according to preliminary data from Chinese customs.
However, DNB NOR Markets Research is posing a positive outlook for the tanker industry by raising its tanker rate forecasts to a 23% increase for 2013 and 13% for 2014-2015. DNB is seeing to a zero fleet growth over the next 12 months, 2% growth in 2014 and 1% growth in 2015 as owners are resisting in tanker ordering and excess vessel supply seems to get balanced with demand. DNB forecasts tonne-mile demand growth of 2.7% for 2012, 2.5% for 2013 and 2.2% for 2014. Tonne-mile demand growth will be particularly impressive in the second quarter of this year, according to DNB. It forecasts an 11% year-on-year increase in sailing distances for crude tankers, while the crude tanker orderbook, as a percentage of the fleet, is said to have been halved from 51% in 2009 to 25% today.

Maria Bertzeletou, Bunker Ports News Worldwide