By Apostolos Rompopoulos
It has been noticed that the UAE met its compliance with the OPEC and non-OPEC production cuts for February, while it continues to make voluntary output adaptations.
The UAE energy minister Suhail Al Mazrouei stated that “In line with the OPEC & Non-OPEC agreement, UAE compliance for the month of February 2019 will meet, if not exceed, it's obligations. This will help to bring balance and stability to the global oil market… ” and he resumed stating that "We will continue to deliver on the OPEC & non-OPEC commitment for voluntary production adjustments, until the global market is re-balanced".
According with some sources mentioned by OPEC, UAE’S output at the end of January was at 3.078 million barrels per day. OPEC producers led by Saudi agreed back in December to reduce production by 1.2 million barrels per day for six months starting January. The agreement came into action following the sharp drop of prices that noted between October and December a significant fall of more than 30%.
According to Saudi Minister, Khalid Al Falih global demand will grow by around 1.5 million per day during the current year, while China and the United States will continue to lead the oil demand globally. In the meantime, cargo allocations by Aramco, seems to remain at 9.8 million per day.
At the same time OPEC’s strategy is being heavily disputed by US president, Donald Trump who keeps arguing for lower prices raising concerns that the price of the commodity has been excessive support. He recently stated that “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile! “.
The rising US production is simultaneously partly offsetting the efforts made by the sovereign producer alliance to keep prices high. Having said that many believe that US crude production could possibly stay stable in the coming months and that oil demand will improve, which will lead the oil market to tighten even more.
While break evens as far as oil production is concerned always vary by region and by company, US oil production – even if it does remain stable – will keep placing a ceiling to oil prices, with the most bearish insisting that the country’s production will be responsible for lower oil prices during this economic cycle.
In conclusion, countries with domestic supply could possibly get hit hard. Spikes in oil prices may cause recessions, at the time that high energy prices divert funds from other parts of the economy.
Chartering (Wet: Soft- / Dry: Stable-)
Capesize performance added more pressure on the dry bulk market last week, while as rates for the big bulkers have been improving in the past days the recent drop in Panamax earnings is now causing additional worries. The BDI today (12/03/2019) closed at 647 points, up by 2 points compared to Monday’s (11/03/2019) levels and decreased by 16 points when compared to previous Tuesday’s closing (05/03/2019). It was an overall down week for the crude carriers market, with VLs rates noting their first weekly decline after almost a month. The BDTI today (12/03/2019) closed at 743, decreased by 11 points and the BCTI at 580, a decrease of 5 points compared to previous Tuesday’s (05/03/2019) levels.
Sale & Purchase (Wet: Stable+ / Dry: Stable+)
Interest in the tanker SnP market seems to be picking up with buyers looking to secure tonnage across all sizes and ages, while on the dry bulk side focus is exclusively still on candidates of up to Kamsarmax size. In the tanker sector we had the sale of the “OLYMPIC LEGACY” (302,789dwt-blt ‘96, Japan), which was sold to Nigerian buyers, for a price in the region of $19.0m. On the dry bulker side sector we had the sale of the “PRIMROSE” (74,716dwt-blt ‘01, China), which was sold to Dutch owner, Oak Marine, for a price in the region of $5.3m.
Newbuilding (Wet: Stable+ / Dry: Stable+)
The newbuilding market remains particularly upbeat, with another generous list of recently surfacing deals reaffirming the strong moment contracting activity is still enjoying. The strong presence of dry bulk orders is definitely noticeable in the list below given the slowdown in dry bulk ordering since the beginning of the year and although most of the above 20,000 deadweight orders concern specialized ships, the pair of Tier III Kamsarmax ordered in Japan is once again evidencing that owners are looking beyond the current freight market and focus more on upcoming regulations and the effects these will have in future. After all ordering activity since the end of 2017 has been mainly finding support on these regulations and in turn it has also supported newbuilding prices extensively, with the average Kamsarmax newbuilding price up more than 12% percent compared to twelve months back. In terms of recently reported deals, Chinese owner, COSCO Shipping Specialized Carriers, placed an order for four firm pulp carriers (62,000 dwt) at COSCO Dalian, in China for a price in the region of $33.7m and delivery set in 2020-2021.
Demolition (Wet: Stable-)/ Dry: Stable-)
Healthy activity was once again reported in the demolition market last week that saw another two vintage bulkers in the >120,000dwt range being sold for scrap. The rather unexpected drop in local steel prices in India has left cash buyers in the country feeling insecure and held them back from concluding any business in the past days, while their counterparts in Pakistan have gone through another week of inertia. This has allowed Bangladesh to almost monopolize any recent action, with concerns that although prices have so far remained steady in the region, the absence of any real competition will most probably lead to lower prices offered from Bangladeshi buyers as well sooner rather than later.
Click here to open Intermodal's Weekly Market Report for the week 10,2019