Shrinking tanker fleet could worsen energy crisis

by John Konrad (gCaptain) A dwindling tanker fleet could worsen the global energy crisis over the next three years as energy companies try to ramp up production to meet demand.

Although some shipping industry insiders have thought the long decline in the tanker market may have finally bottomed out, tanker owners remain cautious and have not ordered many new vessels this year. “The tanker order book is now the smallest it has been in 25 years,” Clarksons Research wrote in its mid-year report.

Bimco’s chief shipping analyst Niels Rasmussen said last week that the fleet of crude oil and product tankers is shrinking. This is partly because new building construction contracts in 2022 are the lowest on record.

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“If contracts don’t improve, we could see the crude and product tanker fleets shrink over the next few years,” Rasmussen said. “The backlog to fleet ratio is 5.1% for crude and product tankers.”

Only 23 tankers have been contracted for construction in the first six months of 2022. The total deadweight tonnage (dwt) of these contracts is barely half of the previous six-month high of 3 million dwt seen over the past 26 last years. Rasmussen believes that unless contracts pick up, the fleet of tankers and petroleum products will shrink in coming years.

Besides the number of new builds, the size of the world fleet is also determined by the number of ships demolished each year. According to Rasmussen, the shipbreaking rate could increase due to the age of the fleet.

In the short to medium term, Rasmussen said there are good reasons for more new construction orders, due to the continued global recovery from the Covid-19 pandemic and the prospect of better rates due of the European Union’s ban on Russian oil.

In the long term, it is unclear what the demand for tankers will be due to factors such as European energy demand, possible escalation of geopolitical conflict and industry goals to meet new decarbonization targets.

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