The extension of OPEC’s production cut until March 2018 will further deteriorate the situation in the tanker market, which is already struggling with overcapacity because of rising supply and declining demand. The production cut will result in increased inventory drawdown, especially during the second half of the year, once seasonal demand creeps in. The expected drawdown in inventories will thus hurt the global oil trade and tonnage demand in the tanker market. Although the likely rise in oil production in the US and Africa will support tonnage demand, leading to increased long-haul trade, still it will not be enough to fully compensate for the production cut.
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