Supply Side Savior?

16 Oct 2020:Can low ordering and increased scrapping revive the tanker
market?
The tanker market appears to be in dire straits at the moment.
Covid-19 continues unabated and is curtailing economic
activity and global energy demand in the short-term. All the
major forecasting agencies (IEA, EIA and OPEC) have reduced
their oil demand outlook in their latest reports and new
consensus is that petroleum demand will not return to 2019
levels until 2022 at the earliest. Some pundits suggest,
demand will never return to these levels, i.e. 2019 was the
peak. Over the long term, the need to combat climate change
will limit future use of fossil fuels, with coal and oil the early
victims, while there may be a role for natural gas as a
transitional fuel. So, what is a shipowner to do? They are
faced with an uncertain future and a dismal current market
where tanker earnings are at or below operating expenses.
Against this backdrop, it is understandable that most
shipowners are not interested in ordering newbuildings, even
though they are being offered at increasingly discounted
prices. However, there is a potential silver lining. Can this lack
of ordering in itself bring about a market turnaround,
especially if it is combined with accelerated scrapping?
Maybe, but a lot of pieces have to fall in place and it is by no
means a sure thing. In this Weekly Opinion, we will explore
the possibilities.