Tanker bottleneck fuels oil prices - There aren't enough tankers to bring more oil to market
Calgary Herald, September 6
By Stephen Ewart
Some analysts fear a shortage of tankers may spark higher prices.
A school of thought is emerging in the oil world that regardless of what pledges may be made in Vienna this weekend, no new OPEC production is coming to market any time soon.
There simply aren't enough extra tankers available to get significantly more oil from the Persian Gulf -- where Saudi Arabia and others could pump more oil -- to consumers in the United States, Europe and Japan, analysts said Tuesday.
"The tanker market is fairly close to capacity," said Julian Lee, an analyst at the Centre for Global Energy Studies in London. "There doesn't appear to be a lot of spare tankers around to move the stuff to market."
In all, there are about 3,100 oil tankers in the world.
Tanker freight rates, one indicator of a tight market, climbed three-fold this year before falling off in the past week.
For example, a tanker moving 500,000 barrels of crude from OPEC-member Venezuela to the U.S. Gulf Coast, would have cost $330,000 in late 1999 but the cost shot up past $880,000 in August.
The transportation-bottleneck theory is disputed by some ship owners and agents but analyst Marshall Adkins of Houston energy consultants Raymond James & Associates said the ramifications of a not fully-utilized tanker fleet are immense.
"The true driver of oil prices over the next 12 months will be oil transportation capacity limitations, rather than OPEC production limitations . . . it looks like $30 oil is here to stay," he said in a report this week.
Adkins doesn't see significantly more OPEC oil hitting the market for 18 months.
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There is widespread expectation OPEC will add 500,000 barrels a day although many industry analysts have said that is not enough to greatly lower prices.
Last week, the New York-based Energy Intelligence Group said one problem Saudi Arabia faced when it tried to unilaterally pump an extra 500,000 barrels a day in August was an inability to find tankers.
"There is a concern there simply might not be enough additional tanker, certainly not enough to move another million barrels a day," Lee said.
It takes about 24 months to build a new tanker, which range in capacity from 100,000-barrels to so-called Ultra Large Crude Carriers which will carry more than three million barrels.
One of the big problems for oil tankers are strict new environmental laws in Europe that caused a lot of ship owners to redeploy their fleets.
"Are we short ships now? We are a little bit but not a significant shortage that is going to cause any problem with getting oil," said Bruce Kahler of Houston-based ship agents Lone Star RS Platou.
"We don't have a shortage of tankers, we've got an imbalance but two or three ships can make a huge difference."
Adkins cautioned that it doesn't take a profound shortage, merely the perception of a shortage, to prompt "hoarding" and make the tanker fleet far less efficient and even reduce OPEC shipments.
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