* 2016 a good year for tankers, but 2017 looks leaner
* OPEC, Russia oil production cut to reduce VLCC demand
* But shippers eye new routes to mitigate OPEC cuts
* Outlook for tanker market improves in 2018
By Keith Wallis
SINGAPORE, Dec 9 Tanker owners are bracing for a
volatile year ahead after enjoying some of the highest charter
rates since 2008, with OPEC plans to curb crude output
potentially cutting rates by more than 40 percent.
Fewer Middle East cargoes will mean lower freight rates for
operators of very large crude carriers (VLCC), the biggest
tankers in operation, which can carry 2 million barrels of oil
and are used mostly by Middle East producers sending supplies to
With average VLCC rates around $45,200 a day, supertanker
earnings are on course to finish 2016 at their second highest
since 2008, the start of the worst downturn in 30 years which
saw average rental prices collapse to a low of $15,500 in 2011.
But Morgan Stanley forecast average VLCC rates could fall
over 44 percent to $25,000 a day next year from current levels
if the Organization of the Petroleum Exporting Countries (OPEC)
and exporters like Russia limit output to 32.5 million barrels
per day (bpd) from Jan. 1, 2017.
This would reduce VLCC demand by over 30 tankers a year,
shippers said, equivalent to almost 5 percent of the global
fleet of 700 VLCCS.
"Any cut to oil production is negative for tankers as it
reduces the quantities of oil," said Ralph Leszczynski of ship
broker Banchero Costa in Singapore.
"However, if most of the cuts fall on the Saudis this could
have some positive implications for the tanker market in terms
of increased tonne miles from other oil producers," he added,
helping to offset the negative impact.
BP is already shipping almost 3 million barrels of
U.S. crude to customers across Asia, pioneering an ultra
With U.S. shale production ticking up and non-OPEC producers
such as those in central Asia also eyeing increases, rates could
be supported for smaller Suezmax and Aframax tankers which ply
these routes carrying 1 million barrels and 800,000 barrels of
One headache shippers can't shake is the growing fleet
following years of over-investment during China's mega-boom.
Around 110 VLCCs and Suezmaxes will hit the oceans next
year, compared to 80 such ships in 2016, said Robert McLeod,
chief executive of tanker owner Frontline, putting
pressure on tanker earnings unless falling rates and new
environmental controls trigger scrappings of older tankers.
But while 2017 still looks challenging, the outlook improves
With new tankers deliveries set to slow in 2018 and 2019,
oil demand growth seen strong, and old ships being scrapped,
Morgan Stanley increased its average VLCC rate forecasts to
$32,000 per day in 2018 and $42,000 per day in 2019.
(Reporting by Keith Wallis; Editing by Henning Gloystein and