Euronav: 2015 Looking Good for Tankers, Volatility Should Be Embraced

Volatility should be embraced, says Euronav

Tanker and floating storage vessel owner-manager Euronav NV (Euronav) Thursday said the group's outlook for the tanker market in 2015 is looking promising.

"The fundamental drivers for the tanker market, supply and demand for seaborne transport, are constructive and support the view of a robust market in both the short and medium term," said the group.

Euronav pointed to various factors it said supported its position, including importantly its view that demand for oil has remained robust in recent years and lower oil prices can be expected to stimulate growth in that demand.

"The fall in the oil price since October should stimulate additional demand as the reduction in the oil price should act as a direct stimulus to the global economy," said Euronav.

"The benefit of lower oil prices also implies a reduction in one of our key operational costs – namely bunker fuel."

In addition, according to Euronav, the tanker fleet order book is at his lowest since 1997, which suggests problems of oversupply in the industry will reduce.

Euronav also said ton-miles, being the average distance travelled per ton of oil cargoes, have structurally increased over the last three years and should continue to do so as Atlantic oil production looks to find its way to Far East markets.

"This in turn should act as a multiplier effect [for the tanker industry] on the underlying demand for oil," said the group.

While a tightening of credit in response to the global financial crisis may constrain the flexibility of some in the industry, Euronav said it was able to access capital markets effectively, bypassing banks.

Volatility Should Be Embraced

Flexibility will be key to being able to take advantage of future opportunities, said the group.

"Tanker markets should continue to grow but are expected to remain volatile.

"This volatility is an essential element of the tanker sector.

"It should not be forgotten but embraced as it provides the Company with ongoing opportunities to deliver value."

For this reason Euronav said it has kept its fleet as free as possible of contracts to be able to capitalise on an expectation of rate growth in the sector.

"We have deliberately exposed our fleet to the spot market for 2015 to benefit from what we believe will be a multi-year, growing freight rate market."

The comments were made in Euronav's 2014 Annual Report, in which the company posted strong revenue growth and a swing to operating profitability, though its net loss sunk lower than in 2013.