DENMARK : We have increased the cargo demand forecast in our base case scenario and now estimate that crude tanker volumes will increase by between 1% and 2% in both 2023 and 2024. This is an increase of 1 percentage point in 2023. For the product tanker market, we similarly increase our 2023 cargo demand growth forecast by 1 percentage point to between 2.5 and 3.5%, while we maintain an estimate of 1% to 2% for 2024.

We also still expect that an increase in average haul will add 3 percentage points to demand growth in 2023 for both the crude and product tanker market. This represents the estimated impact of the changed trade patterns since the European Union banned imports of Russian oil and oil products. We expect that these sanctions will remain in place throughout 2023 and 2024 even if the war in Ukraine should come to an end.

Since our last report, the US Energy Information Administration (EIA) has increased its oil production and consumption estimates. The EIA now estimates that consumption will increase by 1.6 million barrels per day (mbpd) (1.6%) in 2023 and by another 1.7 mbpd (1.7%) in 2024.

Consumption in 2023 is expected to reach 101.0 mbpd and exceed 2019 levels for the first time since the pandemic. In 2024, consumption is forecast to hit 102.7 mbpd, a new record high. China (34%), India (16%), USA (16%), and the Middle East (12%) combined account for 81% of the estimated increase in consumption between 2022 and 2024. The end to COVID-19 restrictions in China is obviously a key driver and especially drives increased demand for jet fuel.

In their base case, the International Monetary Fund (IMF) predicts economic growth of only 2.8% in 2023 and 3.0% in 2024.

Given the consumption forecasts, developments in China are of particular concern to the tanker market. The Chinese economy grew 4.5% y/y in the first quarter of 2023, slightly behind IMF’s full year growth forecast of 5.2%. Growth is challenged by so far insufficient domestic demand and a challenging global environment. From a tanker demand perspective it has, however, been very positive to see the resurgence in both ground and air travel.

Overall, we estimate that cargo demand in 2023 could end 1 percentage point lower than our base case if global economic growth ends near IMF’s low case.

However, year-to-date demand in both the dirty and clean tanker trades have developed very favourably. Tonne miles in the dirty tanker trade have year-to-date been 9.4% higher than in 2022 and the clean tanker trade has seen a 7.5% increase.

As expected, the gains have been a combination of an increase in average haul and increased cargo volumes. Crude imports to China have been particularly strong due to domestic demand as well as an increase in oil product exports. As expected, Russian exports and EU imports have driven much of the increase in average haul.