Every year around this time, the International Energy Agency (IEA) publishes their Medium Term Oil Market Report. The report includes the customary oil supply and demand forecasts and refinery dynamics.
"Most interesting for us in the tanker industry is their detailed discussion of the crude oil trade flows. What does the latest IEA outlook have in stock for the tanker market?" asks, Tanker Research & Consulting department at Poten & Partners.
The IEA forecasts oil demand to increase from 94.4 Million barrels per day (Mb/d) in 2015 to 101.6 Mb/d in 2021, as NonOECD demand increases by 8.1 Mb/d while OECD demand declines by 1 Mb/d during the same period.
Over these six years, oil production in the OECD Americas regains its growth trajectory after an initial decline in 2016. This region increases production by 2.4 Mb/d from the trough seen in 2016/17.
The bulk of the demand growth will be satisfied by a combination of additional OPEC production and drawdowns of commercial oil stocks. In their outlook, the IEA estimates that the “Call on OPEC crude and Stock Changes” will increase by 4.7 Mb/d between 2015 and 2021.
In recent years, the tanker market benefited from a significant build-up in inventories as oil supply outstrips demand. Unfortunately for the tanker market, this trend is expected to reverse in 2017.
The IEA expects that a significant portion of the oil demand growth (around 800,000 b/d) between 2018 and 2021 will be satisfied by stock drawdowns, and when refiners draw down their feedstock inventories, it reduces their crude oil import requirements.
Chinese imports will add about 514 Bn TM but these gains are largely offset by a reduction of imports into OECD Asia/Oceania. Middle Eastern exports increase in volume, but the ton-miles remain about the same, as higher short haul volumes to India replace long haul moves to the Atlantic.
Combining all the trade flows, and taking into account the expected inventory drawdowns, the IEA forecast results in a ton-mile increase of only 1.1% over the 6 year period. Not something to get too excited about.