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This week’s special focus is on the dirty oil flows from Arabian Gulf origin countries to all destinations, particularly in light of the ongoing Middle East tensions. Below, we examine the evolution of these flows between 2023 and 2024, comparing the monthly volumes. In the first quarter of this year, the flow of shipments from the Arabian Gulf followed a similar pattern to that of the previous year. However, noticeable variations began to emerge from April onward. June saw a significant drop, with volumes falling to nearly 65 million tonnes, a stark contrast to the previous year’s record peak of over 75 million tonnes in May.
In the second quarter of this year, there was a clear downward trend from the levels recorded in the first three months. After hitting a low in June, volumes rebounded in July, showing a notable adjustment. Overall, for the first seven months of this year, there has been a 3% decline in the total quantity of dirty crude oil shipments from the Arabian Gulf to all destinations. Despite the escalating Middle East tensions, there has not yet been significant downward pressure on overall tonnage, as July saw a recovery. It remains to be seen whether the impact will be greater in August and September.
When analysing trends by vessel class, it is noteworthy that large vessel categories like VLCC, Suezmax, and Aframax have maintained volumes close to last year’s levels, however, with a slight downward trend. Interestingly, MR2 tankers have doubled their share of dirty oil shipments from the Arabian Gulf compared to last year.
As August draws to a close, the earlier weakening momentum on the VLCC AG-China route appears to have stabilised to a firmer momentum. Despite this stabilisation, the weekly percentage growth in demand tonne days has not yet surpassed previous weeks, indicating that a strong recovery remains elusive.
On the demand side, the persistently weak Chinese economic environment continues to pose significant challenges. China's sluggish economic performance, marked by slow industrial output and a decline in new home prices, is dampening the demand for crude oil imports. This, in turn, affects the VLCC market, as China is one of the largest consumers of crude oil transported via this route.
The ongoing uncertainty in China's economic outlook adds to the difficulty of predicting a near-term rebound in VLCC demand. As refineries in China continue to operate at reduced capacity due to weak fuel demand, the pressure on the VLCC AG-China route is likely to persist. Market participants are closely monitoring economic indicators and potential policy responses from the Chinese government, which could influence oil demand in the coming weeks. However, without a significant improvement in China's economic conditions, the VLCC market may struggle to regain strong upward momentum in the short run.
Data from last week revealed that China's economy lost significant momentum in July, marked by the sharpest decline in new home prices in nine years and a slowdown in industrial output. In response to weak domestic fuel demand, Chinese refineries have significantly reduced their crude processing rates. This downturn has raised concerns about the broader implications for the global oil market. Goldman Sachs analysts have projected that Brent crude prices could fall to $68 per barrel by late 2025 if China's oil demand remains stagnant through the end of next year. The bank noted that "soft China oil demand and downside risks to China GDP growth strengthen our view that the risks to our $75-$90 Brent range in 2025 skew to the downside." Goldman Sachs estimates that China’s year-on-year oil demand growth sharply slowed to 200,000 barrels per day in the first half of this year, with an expected year-on-year decline during the summer.
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Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert
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Increased Use of Renewable Energy:
Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.
Collaboration and Industry Partnerships:
Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.
To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.
Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.
Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.
Creating a sustainable world requires us to embark on a journey towards a zero emission future, where every step is a commitment to preserve our planet for future generations.
Albert Greenway
Environmental Scientist, Sustainability Expert
Increased Use of Renewable Energy:
Shipping companies are embracing renewable energy sources to power onboard systems and reduce emissions during port operations. Solar panels and wind turbines are being installed on vessels to generate clean energy, reducing reliance on auxiliary engines, and cutting down emissions. Shore power facilities in ports allow ships to connect to the electrical grid, eliminating the need for onboard generators while docked.
Collaboration and Industry Partnerships:
Recognizing that addressing emissions requires collective action, shipping companies, governments, and organizations have formed partnerships and collaborations. These initiatives focus on research and development, sharing best practices, and promoting knowledge transfer. Joint projects aim to develop and deploy innovative technologies, improve infrastructure, and create a supportive regulatory framework to accelerate the industry's transition towards a greener future. The Zero Emission Shipping - Mission Innovation.
To pave the way for a greener future in shipping, the availability of alternative fuels plays a vital role in their widespread adoption. However, this availability is influenced by factors such as port infrastructure, local regulations, and government policies. As the demand for cleaner fuels in shipping rises and environmental regulations become more stringent, efforts are underway to improve the accessibility of these fuels through infrastructure development, collaborations, and investments in production facilities.
Liquefied Natural Gas (LNG) infrastructure has seen significant growth in recent years, resulting in more LNG bunkering facilities and LNG-powered vessels. Nonetheless, the availability of LNG as a marine fuel can still vary depending on the region. To ensure consistent availability worldwide, there is a need for further development of LNG supply chains and infrastructure. For biofuels, their availability hinges on production capacity and the availability of feedstock. Although biofuels are being produced and utilized in various sectors, their availability as a marine fuel remains limited. Scaling up biofuel production and establishing robust supply chains are imperative to ensure wider availability within the shipping industry.Hydrogen, as a fuel for maritime applications, is still in the early stages of infrastructure development. While some hydrogen vessels have been tested or introduced in the first quarter of last year, the infrastructure required for hydrogen production and distribution needs further advancement.
Ammonia, as a marine fuel, currently faces limitations in availability. The production, storage, and handling infrastructure for ammonia need further development to support its widespread use in the shipping industry.Methanol, on the other hand, is already a commercially available fuel and has been used as a blend with conventional fuels in some ships. However, its availability as a standalone marine fuel can still be limited in certain regions. Bureau Veritas in October 2022 published a White Paper for the Alternative Fuels Outlook. This white paper provides a comprehensive overview of alternative fuels for the shipping industry, taking into account key factors such as technological maturity, availability, safety, emissions, and regulations.
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