Oil demand supports crude tanker rates despite OPEC+ cuts: Euronav

Crude tanker markets remain supported by resilient, unseasonal oil demand growth despite downward pressure from the supply cuts by OPEC and its coalition partners, Euronav said Aug. 3 while posting stronger second-quarter results.

The Belgian tanker operator, which has a fleet of nearly 70 VLCCs and Suezmaxes, said crude shipments haven't shown seasonal dips during Q2 and Q3 as oil consumption continues to climb on a post-COVID trajectory.

"Seasonal factors...typically tend to reduce cargo volumes," Euronav said in its quarterly report. "However, the impact [this year] is far smaller than historically observed, providing further evidence and confidence that the large crude tanker market is therefore well-positioned to continue the current upcycle based on strong fundamentals."

Despite macroeconomic headwinds, the International Energy Agency(opens in a new tab) still expects global oil demand to grow by 2.2 million b/d in 2023.

"Increased supply from non-OPEC sources and inventory drawdown provides some explanation for the oil price performance and buoyant tanker markets -- as this supply needs to be shipped," Euronav said.

The monthly average rate for VLCCs on the route between the Persian Gulf and China fell from $21.56/mt in March to $11.89/mt in May, before recovering to $15.45/mt in June, according to Platts assessments. This compared with $9.57/mt in June 2022.

Platts is part of S&P Global Commodity Insights.

But Euronav also warned that additional OPEC+ supply cuts since last quarter would "provide a clear headwind for tanker operators primarily focused on the VLCC segment."

The coalition has announced a further crude production cut of 1.6 million b/d between May and December. In addition, Saudi Arabia has voluntarily reduced output by another 1 million b/d for July and August, and possibly longer, while Russia has announced a 500,000 b/d cut in exports this month.

The Persian Gulf to China VLCC rate was assessed at $12.07/mt Aug. 2, down from $21.41/mt June 19, according to Platts.

Robust results

Euronav reported an average spot time charter equivalent rate for its VLCCs of $55,000/d in Q2, up from $17,000/d in the same period of last year. Its spot Suezmax rate rose to $68,000/d from $20,000/d.

So far in Q3, the company's VLCCs have earned $44,750/d in spot trades for 45% of available days fixed, while Suezmaxes earned $49,500/d for 50% fixed.

Europe recorded a net profit of $161.8 million in Q2 versus a net loss of $4.9 million in the same period of 2022. Revenue rose to $348.2 million from $148.7 million.

The Q2 results were the company's best, aside from 2020, when tanker rates spiked to all-time highs due to floating storage demand during the COVID-19 pandemic, the company said.

"Euronav's operational and commercial platform is robust...positioned for further growth to extract maximum value from the strong multi-year upcycle of the large crude tanker market," said Lieve Logghe, chief financial officer and interim CEO.