By Keith Wallis

SINGAPORE, July 12 (Reuters) – Oil tankers face uneven waters over the subsequent 18 months as a torrent of recent ships pushes down freight charges, simply as buoyant oil demand slows, probably ending a profitable run for the sector.

Owners of very giant crude carriers (VLCC) and Suezmax tankers, the workhorses of seaborne crude oil transportation, had their greatest yr in 2015 for the reason that growth instances of 2008 and the pattern has continued within the first half of 2016.

Strong crude demand and port congestion from China to Iraq have pressured oil into offshore tanker storage in ports resembling Singapore and Rotterdam, offering homeowners with further income in an already tight market and pushing up day-rates.

But day by day constitution charges are seen falling within the second half of 2016, with the worldwide fleet set to develop by seven % in simply six months as homeowners take supply of some 85 new VLCC and Suezmax tankers, based on British shipping service agency Clarkson and New York ship dealer Poten & Partners.

The vessels will add to an current 1,173 VLCC and Suezmax tankers in service, together with 23 delivered within the first half, whereas one other 47 are due subsequent yr.

“Unfortunately, shipowners have a talent for shooting themselves in the foot. We already saw the effect of this in the rates in recent months, and deliveries in the second half of the year will be even heavier than in the first half,” mentioned Ralph Leszczynski, head of analysis at ship dealer Banchero Costa, often known as Bancosta.

The wave of recent tankers hitting the market may come simply as demand for oil slips consistent with slower financial development in Asia and as refiners dial again on crude oil to assist scale back an enormous gas glut.

Charter charges for a VLCC have averaged between $50,000 and $65,000 per day over the previous yr, the very best degree for the reason that peak of the commodities growth in 2008, when charges hit $92,511 a day, based on Clarkson figures.

VLCC freight charges are prone to be decrease this yr than in 2015, as a result of new tonnage, however gained’t fall again so far as 2014’s day by day common of $27,500 given demand ranges, mentioned Peter Sand, chiefshipping analyst of trade group BIMCO.

CHOPPY WATERS, NO STORM

Most shippers count on to remain within the black.

Frontline, ranked the world’s eighth-largest tanker proprietor by fleet dimension, places breakeven prices at $22,500 a day for a VLCC and at $17,900 per day for a Suezmex tanker, and has mentioned it doesn’t count on charges to fall that low.

Rates are anticipated to be supported by oil corporations shifting in the direction of extra fuel-efficient youthfulships – these lower than 15 years outdated – resulting in a lot of older vessels being retired fromshipping and used for different functions.

“Our customers prefer younger tonnage – this trend is increasing. Vessels are sold for conversion projects or long term storage,” mentioned Robert Hvide Macleod, chief government of Norway’s Frontline Management.

At least 4 of the 13 VLCC and Suezmax tankers bought within the first half of 2016 are getting used for floating storage, shipping information confirmed.

With oil costs climbing again to round $50 a barrel, orders to transform supertankers into floating storage will enhance in 2017/18, mentioned David Boggs, managing director of Energy Maritime Associates.

The variety of VLCCs reaching 18 years outdated – an age when repairs are likely to turn into extra pricey – will begin to speed up this yr, lowering the worldwide VLCC fleet by round a 3rd by 2025, from 672 to 457 ships assuming no new orders, based on information from Norwegian ship dealer Fearnley.

“If we survive the storm of deliveries of this year and next, from 2018 onwards it could actually be much more smoother sailing for the supertanker market,” mentioned Bancosta’s Leszczynski.

(Reporting by Keith Wallis; Editing by Henning Gloystein and Richard Pullin)

(c) Copyright Thomson Reuters 2016.