An In-Depth Look at Euronav's 1Q16 and Beyond
PART: 1234567
PART 2
An In-Depth Look at Euronav's 1Q16 and Beyond PART 2 OF 7
Euronav Discusses Short- to Medium-Term Tanker Industry Outlook
By Sue Goodridge | Apr 28, 2016 3:06 pm EDT
Looking forward
Euronav (EURN) commented on the crude tanker industry’s short- and medium-term outlook in its 1Q16 earnings release. In this article, we’ll look at some key points mentioned by Euronav.
This will help us to analyze Euronav and other crude tanker companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), and Navios Maritime Midstream Partners (NAP).
Euronav Discusses Short- to Medium-Term Tanker Industry Outlook
Crude oil demand
According to Euronav, the fundamental drivers for the crude tanker market remain positive for the short- to medium-term. Brent crude oil prices fell by an average of 21% during 1Q16 compared to the previous quarter.
Lower oil prices stimulate crude oil demand. According to the International Energy Agency, crude oil demand growth will be 1.2 MMbpd (million barrels per day) every year until 2020. Euronav believes that to cater to this demand growth, 36–49 more VLCCs (very large crude carrier) will be required.
Vessel supply
According to data provided by Clarkson, 45 new VLCCs will enter the global fleet in 2016. The orderbook is heavy toward the end of the year. In the fourth quarter, 19 VLCCs will enter the market. Around five vessels will be scrapped in 2016, so the net fleet addition will be around 40 vessels.
In 2016, 27 Suezmax vessels are expected to enter the world fleet, and around three will be scrapped. Thus, the net addition will be 24 vessels. The Suezmax orderbook is also heavy toward the end of the year, with 12 Suezmaxes expected for delivery in the fourth quarter.
Euronav believes that the demand structure is adequate to absorb the increase in vessel supply. Clarkson further provided data regarding the orderbook.
New orders have drastically fallen. In 1Q16, only one VLCC and two Suezmax orders were recorded. This was due to difficulty in accessing capital in the tanker sector. The company believes that further vessel supply will remain constrained for the foreseeable future.
Investors who are interested in broader exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).