🧵 This chart reflects what happened in the AG VLCC market last week, as owners withheld vessels and stopped offering into AG cargoes, on regional threats. VL earnings doubled, as the supply curve shifted left against an inelastic demand curve.
#oott #tankers $FRO $DHT $INSW $ECO $TNK $TEN Not to be confused with what typically occurs when earnings double. More often than not, it is from an increase in demand and the rightward shift in the demand curve (with some supply assist).
This is not what is happening, as the near-term oil demand and refining fundamentals remain the same, absent any crisis events. The curves D0 and S0 remain a closer representation of the VL market balance without any geopolitical drama.

🧵 We had no idea there was only “one” correct VLCC earnings seasonality chart, when in fact, these charts are a deeply-flawed approach to “predicting” winter earnings. Freight is a derived demand, and so…
#oott #tankers $FRO $DHT $INSW $ECO …any “freight seasonality” actually derives from the seasonality of the oil fundamentals – product demand, crude runs & utilisation, crude/NGL supply & inventories – which can vary significantly from year to year.

This is the product tanker investment hypothesis in its entirety -- replacing Russian gasoil from further sources, sending utilisations to 99% and earnings to $250k/day. By now, it has become an unquestioned mantra in the market. One small problem… #tankers $ASC $HAFNI $STNG When we constructed our European recession scenario a few months ago, with a 3% decline in 2023 real GDP, we felt a bit extreme. We later trimmed it to -2.6%, but now feeling this might be too sanguine. Weak Case sees an extended downturn à la BoE.

The problem with this assessment of the OPEC+ cuts, & the tanker commentary that you post, is the sticky assumption that oil demand will grow 2.1 mbpd next year, per the IEA latest. This is nonsense, and with tomorrow’s IMF WEO release, this is “should” start to change. #tankers

https://twitter.com/ed_fin/status/1579394310709342210

We have argued that retail tanker longs are disadvantaged by listening to shipbroker & sell side analysts, who do not have the analytical tools & large datasets to convert alternative macro outlooks into new oil & tanker demand forecasts, amidst lagged demand data.

Updated our PADD1/PADD3 mass balances for the quiet hurricane season so far & for scheduled maintenance. Medium-term drop in USG exports from P3 demand, net capacity reductions & more sustainable utilisations & yields, but also from critical PADD1 requirements. #tankers #oott The trade press loves running apocalyptic headlines on the low gasoil inventories in PADD1 and elsewhere, but the market needs to adjust to lower stocks and just get over their 5-yr averages. Still, just to keep stocks stable in PADD1 this Autumn & Winter…