Suezmax demand outpaced all other sectors in 2017, growing from 2.35 trillion ton-miles to 2.59 trillion ton-miles, about a 9.8% change supported by increased Middle East flows to Europe and long-haul trading from the West (Southern Europe primarily) to the East. However, we observed weakness in the West African Suezmax trades into Europe amid higher crude oil output in the latter and a sizeable shift of Brent-linked West African volumes heading to the East aboard VLCC tankers.
Using our remotely-sensed vessel position data, we recorded a 50 voyage increase on this VLCC trade (197 to 247) in 2017, supporting our ton-mile demand growth calculation of 20.8% for the year for the second largest VLCC trade, while at the same time, Suezmax demand out of West Africa into the Mediterranean was down 40% year-on-year with more locally available crude along with Iranian and Iraqi volumes competing for refinery demand.
A major development impacting West African Suezmax demand is the emergence of Southern European crude oil availability from restored Libyan output, growing Caspian Sea (Kazakhstan) as well as more penetration from Middle East suppliers including Iraq and Iran. Distillation of our remotely sensed vessel position data clearly shows the shift Eastward for West African barrels, with a 55 Suezmax voyage decline from West Africa to the Mediterranean region.
Looking forward, we remain skeptical about Suezmax demand originating in West Africa. Crude oil supply in the Mediterranean region is projected to grow by 417,000 b/d over the next two years with about 25% of that growth being matched by an increase in regional refinery demand, according to JBC Energy. Additionally, we must also make note of the planned start of Nigeria’s 650,000 b/d Dangote refinery by the end of 2019, absorbing some of the regional crude oil supply. These developments in West Africa and Southern Europe will lead to further declines in ton-mile demand of about 1% – 2% on an annualized basis, with growth instead heading East for 2018/19.
Source: Hellenic Shipping News.