Following downward trends in the oil prices in the global markets, the shipping operation costs have gone down, as demand for oil tankers have gone up due to moves by some countries to stockpile oil, taking advantage of the lower oil prices.
A ship owner and Chief Executive Officer, Dubai-based United Arab Chemical Carrier, Mr Per Wistoft, who operates a fleet of tankers in the Middle East and the Indian subcontinent, said this development was having a positive effect on the shipping industry and expecting the profits of companies to go up this time.
Oil prices have been sliding for the past few months. From a peak of $115 in June, prices have dropped to around $50. Analysts have predicted the trend to continue till the second quarter of this year.
According to Wistoft, bunkering costs have almost halved since last year and the demand for oil tanker has gone up.
Bunkering costs of very large crude carriers, also known as super tankers, have come down from $40,000 per day to $20,000.
“This has been a substantial help for shipping companies to overcome the cost. Bunkering is one of the major expenses of the shipping companies.”
He predicted floating storage to increase due to low oil prices. Floating storage is a method by which oil companies hire large vessels to store oil and sell when the price increases.
The capital utilisation to procure oil is much less than before due to falling oil prices, Bounty Marine Services that is involved in bunkering of oil said.
“Buying of diesel has become cheaper due to the market situation. Entire shipping industry is going to benefit,” said Sudai Jallad, the owner of Bounty Marine Services.
He said they used to spend $80,000 for buying 100 tonnes of diesel earlier. “We now get the same quantity for $50,000. It is 40 per cent less.”
Meanwhile, an analyst said China was in an oil buying spree due to lower oil prices but it is unlikely to prop up global oil markets.
“In this time of low oil prices, it comes as no surprise that China is stockpiling fuel,” said Daniel Ang, investment analyst from Phillip Futures.
He added that China was one of the biggest consumers and importers of crude oil, and taking advantage of oil when prices are low is a strategic move.
“However, we see the big uptake of crude oil by China to not be reflective of China’s crude oil demand. These stockpiles would likely remain unused in the short term and thus, giving only an artificial boost on crude demand,” Ang said.
According to shipping consultancy Drewry, container shipping profitability is expected to improve in 2015, despite record vessel deliveries, driven by lower unit costs.
It said more carriers were expected to be profitable in 2015, provided that a number of tailwinds prevail. These include continuing carrier focus on vessel deployment; fuel costs remaining low; recovering demand; successful outcome of annual BCO (Beneficial Cargo Owner) contract negotiations; and new operational alliances delivering greater market stability.