According to the shipbroker, “in terms of a regional breakdown, emerging and developing countries are projected to fare better next year than advanced countries, where the worst is yet to come. The GDP growth in the US is projected to slow down from 1.6% in 2022 to just 1% in 2023, as declining disposable incomes and higher interest rates take their toll on spending. In the Euro area, GDP growth is projected to decline to just 0.5% in 2023 from 3.1% in 2022, reflecting the spillover effect of the war in Ukraine. In contrast, GDP growth in emerging markets and developing economies is expected to increase by 3.7% both this year and next, relative to 6.6% in 2021”.
Gibson added that “these economic concerns prompted the International Energy Agency (IEA) to revise down their expectations for global oil demand as well. The agency reduced its 2023 demand growth estimates by 470 kbd, with world oil consumption now expected to grow by 1.65 mbd next year. Annual 2022 demand saw a modest 90 kbd downward revision, but the IEA expects global consumption to contract by 340 kbd YoY this quarter. With the economic storm in advanced economies expected to intensify, oil demand in OECD countries has understandably also been revised down. Oil consumption in the US and the OECD Europe is now largely expected to remain flat in 2023 YoY. However, the largest downward revision was made to China’s oil demand, on the back of ongoing Covid related restriction and on expectations that these restrictions will continue, at least in the short term. The IEA now sees Chinese oil demand growing at 0.8 mbd in 2023. However, as future lockdowns cannot be ruled out, there remains a significant threat of further downward revisions to Chinese demand, which accounts for half of global oil demand growth next year”.
Gibson concluded that “all of the above points a rather gloomy picture for the near-term. Yet, with spot earnings in the crude tanker market spiking and strong returns seen for clean tonnage, there is a clear disconnect between the economic prospects, looming reduction in OPEC+ production levels and the current reality in the spot market. Of course, changes in trade flows are the main driver behind the current robust tanker earnings, with further increases in tonne miles into Europe to come once the EU ban on imports of Russian crude and products comes into force. However, there remains a big uncertainty in terms of Russian flows. A big chunk of tonne miles demand growth so far this year has been due to Russian crude travelling further afield. If these flows are to decline, this will remove an element of support to crude tanker markets. The same could also see oil prices well above $/bbl once again, translating into even deeper global economic turmoil”.
