Rates may rise due to decreased vessel availability
This week, OPEC+ announced a further increase in oil production by 411,000 barrels per day (b/d) starting in June, following a similar rise in May. With a total supply increase of 960,000 b/d from April to June, the group has now reversed approximately 44% of its previous reduction of 2.2 million b/d.
Why this increase in volume benefits maritime transport rates
This increase in production is expected to:
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Increase the volumes of crude oil transported by sea in the short term
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Support the demand for tankers in key exporting regions, particularly in the Middle East
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Could extend the favorable freight environment into the summer months
If production continues to rise in July, the trend could further decrease vessel availability and enhance earnings, particularly for VLCC and Suezmax operating on long-distance routes.
Could the reductions be completely reversed this year?
Goldman trader Gerald Tan notes in a memo that OPEC's decision coincides with "a rise in geopolitical tensions in the Middle East following a Houthi missile strike on Israel's main airport."
According to Reuters, OPEC+ might lift its entire voluntary reduction of 2.2 million b/d as early as November, which would benefit the tanker market with more crude entering the market.
Source: Shippingwatch, Reuters