Red Sea attacks leading to shortage of oil tankers and trade disruption

The oil tanker industry is facing challenges due to a lack of new ship construction, with only two new supertankers expected to join the fleet in 2024 – the fewest in almost four decades. This shortage of capacity is a result of shipping companies avoiding the southern Red Sea, leading to increased rates and longer journey times. The situation has been exacerbated by the broader energy transition towards the elimination of fossil fuels, clouding the industry’s long-term prospects. However, the tanker shortage is creating a positive outlook for owners, with the efficiency of the global fleet declining and many ships sailing longer distances to avoid the Red Sea.

The disruptions in the Red Sea following Houthi attacks on merchant shipping have led to changes in global oil flows, with shipments occurring over longer distances. Tanker ship employment rates have risen as ships avoid the waterway, favoring ship operators and creating a better market mood. Despite a recent surge in orders for new tankers, the historically low order backlog and constraints at shipyards mean new ships will take years to arrive, contributing to the positive outlook for tanker owners. Stock analysts are mostly optimistic about tanker owners, emphasizing the limited order book, aging fleet, and environmental regulations as factors supporting a good market for tankers in the foreseeable future.

Although there are reasons for caution, such as OPEC+ production cuts and high freight rates potentially reducing tanker demand, the overall sentiment is optimistic for tanker owners. Frontline Plc and International Seaways Inc., among the top tanker owners, have received positive ratings from analysts due to the favorable market conditions expected to persist in the tanker industry. The impacts of the tanker shortage, along with geopolitical disruptions and changes in global energy flows, continue to shape the dynamics of the industry and influence investment decisions in the sector.

Source .