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Surge in oil exports good for shippers

Saturday, November 11, 2017

CUTS in OPEC output that have led to a surge in US oil exports to Asia may prove a godsend for struggling global shippers, driving rates for large crude shipments to China, India and other major oil importers sharply higher over the next year.

Operators such as Frontline Ltd, Euronav and Gener8 Maritime are still recovering from five years of weak rates and falling profits, and face more financial headaches after a glut of new supertanker launches.

But OPEC's strong compliance with output cuts agreed in 2016 is boosting prospects for the business by raising demand for previously little-used US-Asia routes and allowing tankers to refill in the Gulf on return journeys to the United States.

"The impact of rising Asian demand will not be seen in strong earnings in the next two quarters, because there is still the problem of overcapacity," said George Los, the head of tanker research at US ship brokerage Charles R Weber Company.

"But by mid 2018 and by 2019 it will be able to make a notable impact on VLCC (Very Large Crude Carrier) rates."

The rate to ship US crude oil from the Gulf of Mexico to Singapore TD-LPP-SIN — still a relatively new route — has risen more than 50 per cent since August to stand at $US15.54 ($F32.16) per tonne.

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