Tankers See Strongest Market due High Demand for Oil

The EU embargo on Russian oil could further boost demand. The EU sanctions do not prohibit the shipment of Russian oil to non-EU countries, and this is already happening.

It's hard to know where the EU's oil will come from, but we can be sure that once the embargo comes into effect, the EU will have to get oil and oil products from further afield, and we expect this to increase demand for more than 100 MR-type tankers once the embargo comes into effect," Hafnia CEO Mikael Skov said in a recent media interview.

"None of us know exactly what will happen next year and how long this will last, but if we look at the fact that about 50% of the EU's oil products are currently sourced from Russia and extrapolate to what happens when the oil ban comes into effect, we can easily calculate that the market will need at least 100 MR-type vessels for capacity and that type of vessel is actually currently almost all of them are already being used."

Will oil tanks rates continue to rise?

Skov said, "It will probably happen."

Skov expects that the current market for product tankers, where freight rates are already high, may continue through 2025.

The CEO said, "It's largely the demand for product tanker tonne nautical miles (distance) that is pushing product tanker rates/rentals to such high levels. But all along, our view has been that 2022, 2023 and 2024 will be strong years due to limited new vessels and a return to pre-Covid-19 levels of oil demand."

Market risks that cannot be ignored

Despite the positive future of the product tanker market, Jakob Meldgaard, CEO of Torm, said there are still risks to the market that cannot be ignored.

In a recent interview with the shipping press, Meldgaard also said that the macroeconomy is now rapidly changing and that "market headwinds could emerge later this year or in 2023. General inflationary pressures, further central bank interest rate hikes, high energy costs and an overall economic slowdown could all pose risks to the market."

Jacob Meldgaard emphasized that "the risk of Covid-19 remains as the Northern Hemisphere moves into fall and winter over the next six months, and new variants could emerge."