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Tanker rates still weighed down by the pandemic and low demand

The demand for oil is low as a result of the Covid-19 crisis, and so are the freight rates for oil tankers. This spring, rates were up to four times lower than in the first five months of 2020, according to an analysis from Bimco. IEA expects demand to normalize in 2023.

Photo: PR / Euronav

While container carriers ride the wave of record-high freight rates, tankers had to deal with up to four times lower rates in the first five months of the year compared to the same period in 2020.

According to an analysis from Bimco, average rates for product tankers in the Spring were so low that tanker carriers couldn't cover their costs. The average rates for all oil product tankers were between USD 9,168 dollar and USD 10,334.

Rates were even worse for the VLCC segment, very large crude oil tankers, for which the daily rate for a 270,000 tonne tanker on the China-Persian Gulf route – which is the benchmark – was below USD 3,000 from mid-January to mid-May. Overall, things went somewhat better for VLCC tankers in the period from early April to mid-May with average daily rates of USD 12,302.

Bimco points to the Covid-19 pandemic as a direct cause for the weak tanker market. Multiple lockdowns resulted in significant drops in economic activity. For the tanker market, the severe Covid-19 crisis in India in particular has had a major impact as India is the second largest importer after China of crude oil by ship.

In the 12-month period from April 2020 to March 2021, activity dropped at Indian oil refineries by 12.8 percent compared to the same period last year, according to Bimco.

Globally, Energi Agentur, IEA, expects demand for oil to reach 96.4 million barrels per day, which is 3.3 million barrels lower than 2019, but 5.4 million barrels more than 2020. According to IEA, oil demand will normalize in 2023.

English Edit: L. N. Barnes

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