McQuilling Services has published its latest five-year forecasts for the tanker trades with the American firm favouring prospects for mid-sized tankers this year over the bigger ship types.
The 196-page, 27th edition of McQuilling’s Tanker Market Outlook contains a five-year spot and time charter equivalent (TCE) forecast through to 2028 for eight vessel classes across 27 benchmark tanker trades, plus five triangulated trades.
McQuilling’s prevailing view for the crude tanker markets continues to favour the mid-sized tankers over VLCCs in 2024 as major VLCC hubs – Middle East and West Africa – reveal tighter crude balances. The year 2025 is expected to find VLCC demand on the rise (+3.9%) as OPEC production increases and a potential contango structure support higher VLCC utilisation in the context of a dwindling orderbook.
Canada’s new pipeline project, TMX, is covered in the report. The pipeline is estimated to commercialise in the second half of this year. Due to draft limitations, aframaxes and panamaxes will benefit the most to export Canadian crude, according to McQuilling, introducing new trading patterns in the Pacific Basin market, which the authors of the report say will likely come with a plethora of inefficiencies.
Aframax and LR2 fundamentals have incentivised skewed newbuild orders totalling 105 in 2023 compared to only 17 VLCC orders, resulting in McQuilling models revealing VLCCs to outperform smaller crude tanker sectors by late 2025.
McQuilling’s base case 2024 TCEs is $45,900 a day for VLCCs, while aframaxes and suezmaxes outperform at $55,000 a day and $50,200 a day respectively, basis eco tankers without scrubbers. McQuilling calculations amid Red Sea developments reveal a negative impact (-$8,300 a day) on VLCC earnings should Saudi Arabia maximise its East-to-West Pipeline throughput, while aframax TCEs may increase by $42,400 a day from the base case.
Turning to product tanker earnings McQuilling projects LR2s to earn $56,500 a day in 2024, basis eco tankers without scrubbers, out-earning MRs by 40% excluding Red Sea impacts.
Secondhand values for aframax and LR2 tankers have the most upside over the next two years, McQuilling is forecasting.
