Hi Paul,
I’m sure by now you have seen NORDEN’s results and have watched its webcast with HCA. It was great to understand the company’s expectations for 2023.
The dry bulk will continue to be the main revenue driver here in H1 2022, and Martin gave valuable insight into how the embargo on product tankers is being administered. For now, it appears the embargo is adding to the tonne mile effect, and routes are being re-written. I will be closely following the movements of the Baltic Clean Tanker index over the coming days and weeks.
It is clear the market will react to the tightness of implementation, with NORDEN pointing to the inventiveness of the market and the potential for loopholes. Only time will tell on this front. Next week we have more industry earnings which will also be valuable to follow with respect to forward guidance for product tankers.
Today Russia announced a cut of 500,000 b/d in response to the embargo, A move I understand to be largely unexpected. Reduced market volume can reduce tightness from the tonne-mile effect, and we are fortunate to have earnings from other players throughout the month to understand how market conditions develop.
I wonder whether Russia’s move is a result of its inability to sell its capacity rather than a pure retaliation. The below article from Shipping News suggests that India is running its refineries at full capacity, fed on cheap Russian crude.
It will take time for markets to reach a new equilibrium, and that creates volatility. The next months will probably be a bumpy ride for shareholders of product tankers, NORDEN included. Where that equilibrium ends, we will see, but for now, tonne miles are increasing, and oil demand remains strong. I will keep paying attention and update the forum as events unfold.