Mette Frederiksen

What attracted you to Tankers International?

I’ve always been fascinated by data and turning it into something commercially useful. This interest led me to pursue a master’s degree in business analytics at the University of Southampton. Here, I got to grips with the theory behind how data can make a meaningful impact, in addition to practical data visualisation tools such as Power BI.

Straight from university, I landed a role at AirAsia as an analyst. It was there that I started translating my knowledge of and passion for data into insights that could inform business-critical decision-making. I look back and see many similarities between aviation and shipping, for example understanding performance and trends on vessel and airline routes and creating dashboards that can tell the right story.

It was an initial meeting with Mette Frederiksen, Head of Research & Insight that sold the opportunity to me. I immediately aligned with Tankers International’s mission and values and was excited by not only the volume of valuable data but also the company’s approach to translating and sharing it with Pool Partners for their commercial advantage.

What have been your personal highlights during your time at Tankers International?

I wanted to find a role that allows me to make a tangible, meaningful impact. At Tankers International, I felt I had this opportunity right from the start. For instance, I’ve been able to translate data into insights that have made a genuine economic difference to the Pool’s performance. As part of TI’s in-house data team, we are building dashboards from scratch and on demand. It’s not just a ‘nice to have’ for TI; the qualified data is used across the organisation, from the chartering desk to the operational team, to assist sound decision-making.

How does your role support Tankers International?

Data is at the very heart of Tankers International. But, raw data alone does not provide meaningful insights. As a data analyst, my role is to act as the bridge between data and insights.

On a typical day, requests come in from across the organisation. On the commercial side, these requests can be anything from comparing and contrasting the performance of different vessels or routes, to understanding how trade patterns change over time. One example is a Time Charter Equivalent (TCE) tracker dashboard that we’ve developed, which helps the team monitor the TCE throughout the voyage and understand the performance of a vessel.

We also get requests from the finance department. Currently, we’re working on a tool that will enable the team to review the Pool’s financial performance from different dimensions. Using digital tools, we can pull together information from several siloed platforms into one dashboard to create a single view from which decision-makers can view all relevant information.

What can we expect to see from Tankers International in 2024 and beyond regarding the use of data and digital tools?

It’s a case of Tankers International continuing to walk the walk when it comes to the use of data and digital tools. Being wholly focused on the VLCC segment and collecting 40+ data points for every VLCC fixture in the market puts us in a unique position to collate and share genuinely transformative insights. Much of this is to the benefit of our Pool Partners through more efficient trading of our own fleet, but it also allows us to continue the development of our VLCC fixture app to add more transparency to the VLCC market as a whole. This follows recent updates to the app, such as the introduction of Baltic Exchange data and Carbon Intensity Index (CII) data.

How does Tankers International differ in its approach to data?

Data and technology alone can’t deliver maximum institutional value. It requires the human touch, which is why TI has invested heavily in a dedicated research and insights team. As a company, we have also invested in internal solutions, including digital technology, that bring together data streams from various platforms to present an integrated data visualisation tool for decision-makers across the organisation. It’s the human knowledge and experience combined with the software, tools and technology that sets Tankers International apart when it comes to data intelligence.

As the first half of 2024 draws to a close, the VLCC market presents a picture of moderate improvement without the dramatic boom witnessed in other tanker segments. While freight rates have exhibited a steadier trajectory compared to the volatility of 2023, peak levels haven’t quite reached the heights anticipated. But at the same time, the lows haven’t dipped as drastically either. That being said, all the right factors are in place, and the VLCC segment taking part in the super cycle is a question of when, not if.

Fundamentals

The underlying fundamentals supporting the VLCC market remain largely unchanged since the beginning of the year. The key driver continues to be a lack of fleet renewal, with minimal new deliveries offset by a significant number of vessels exceeding their traditional 20-year lifespan. Scrapping activity and other forms of vessel retirement have remained subdued due to a period of relatively strong returns and optimistic market outlooks. Additionally, the growth of the “dark fleet” persists, providing an alternative outlet for these older ships. Comparing an orderbook-to-fleet ratio of just 7% to an older fleet representing 21% of the trading fleet, the fleet profile is supportive of a tightening tonnage balance.

The recent effective closure of the Suez Canal and the wider Red Sea area, which significantly impacted product tanker markets, has had a relatively muted effect on the VLCC sector. The inherent nature of the VLCC market, where historically only a limited number of vessels utilise the Suez Canal, has meant limited disruption to the segment and a mere 4 VLCCs equivalent increase in demand due to the rerouting. This is where the product tanker segment has found surging support over the past 6 months.

The ongoing Russia-Ukraine conflict continues to play a crucial role in shaping all tanker markets, including VLCCs. Russian oil continues to be diverted to buyers outside Europe, prompting Europe to source supplies from alternative sources like the US, West Africa, and the Middle East. This dynamic translates into more inter-Atlantic trading, where VLCCs become competitive when freight economics permit. This does not necessarily mean longer tonne miles, but these routes provide access to more creative trading opportunities and allow owners to triangulate vessels and optimise their fleets.

OPEC+

The Middle East to Far East route remains the backbone of the VLCC market. While OPEC+ production cuts have restrained oil flow from the Middle East region, positive signals are on the horizon. Recent announcements from OPEC+ on their production management strategies pointed to a gradual phase-in of previously curbed production volumes starting in October. The group plans to add 2.5 million barrels per day over the following 12 months. This includes bringing back 2.2 million barrels of voluntary cuts and allowing the UAE to raise production by 0.3 million barrels per day. Additionally, the market anticipates a rise in incremental supply from Atlantic basin producers such as the US, Canada, Brazil, and Guyana. As incremental demand is expected to remain concentrated in the East, this scenario translates into long tonne mile demand for VLCCs.

The positive news continues, with forecasting agencies all projecting a rise in oil demand over the year and, in particular, during the second half of 2024 compared to the first. Much of this hinges on China fulfilling the robust demand projections predicted for the nation. China’s leadership has set itself an ambitious economic growth target and is taking proactive measures to achieve this. Historically, this proactive approach is closely linked to growth in oil demand and, importantly for the VLCC segment, a rise in oil imports. Furthermore, the optimistic demand outlook from the forecasting agencies point to growth in the Call-on-OPEC, which aligns with OPEC+ plans for a phased production increase.

The VLCC market has shown resilience in the first half of 2024. While not experiencing the dramatic boom of other tanker segments, it has exhibited steady growth with positive indicators for the remainder of the year. Stronger demand growth, the return of some OPEC+ production and continued geopolitical influences are all factors to monitor as the market navigates the second half of the year. We remain optimistic that the VLCC segment will find its moment to enter the stage and take an active part in this year’s super cycle.

As we wrap up the first quarter of 2024, the VLCC freight market continues its upward trend amid rising tension in the Bab-el-Mandeb, tightening of sanctions on companies involved in Russian oil trade, and the OPEC+ group announcing an extension of the supply curbs that were put in place at the start of the year. Yet, with Baltic freight assessments and sentiment improving, the VLCC market is on the up. So, how have these developments impacted the VLCC market, and what is the outlook for the next quarter?

While the crude tanker market looks set to face a slowdown in global oil demand growth, the outlook for growth in 2024 remains in line with what we have seen in previous years, and the outlook for the year keeps improving. This is reflected in the IEA forecasting an additional 1.3 million barrels of growth in 2024, which matches the average between 2000-2019.  We also need to remember that the fast-paced demand growth we experienced in the last couple of years was the market playing ‘catch up’ following the demand destruction of the Covid years. Demand growth will be driven by economies in the Far East, with China and India leading the way.

The OPEC+ alliance is also driving oil headlines by announcing a voluntary tightening of supply going into 2024 and a further declaration to extend the production curbs into the second quarter. There have been reports of lax quota compliance from some alliance members, and the voluntary nature of the production cuts supports this theory. Meanwhile, producers in the Atlantic basin are set to continue to add incremental supply and this will compensate for some of the tightening of supply from OPEC+ alliance, and will satisfy the demand gap in the Far East. Preliminary data from our VLCC fixture database, does not show any significant drop in fixture volume, and this is across all the major load regions.

The escalation of the tension in the Bab-el-Mandeb strait through the first quarter, with further attacks on oil tankers, has seen a significant decline in international tonnage of all types transiting the strait and the Suez Canal. The alternative trade route via the Cape of Good Hope adds considerable tonnemile to the oil trade, and there is no sign that this will change in the near future. Looking specifically at the VLCC segment and the 6-8 monthly liftings from the Middle East to Europe that historically have passed the conflict area, the majority of owners and charterers are now opting for the longer, safer transit route via the Cape. This adds around 15 days to the laden leg of the voyage, and apart from delaying crude supplies reaching Europe, it also increases tonnemile demand for the VLCC segment.

The start of this year has also seen tighter enforcement of Russian sanctions, and this threatens to once again transform the commercial framework around the trading of Russian oil. The Russian market is becoming increasingly difficult for mainstream industry players to get involved with and Russia continues to rely on the dark fleet to move its barrels. Only a few VLCCs are involved in lifting Russian cargo, and the commercial implication for our segments remains with the shift in general trade flows whereby Europe is taking more crude from the Atlantic Basin, and from the Middle East.

One of the biggest stories from this quarter has been a resurgence in VLCC tonnage ordering. The first three months of the year saw the orderbook double in size, and historically an expansion of this scale would pose a huge disruption to the freight market outlook. However, the orderbook-to-fleet ratio remains historically low even with the addition to the orderbook. The full orderbook holds 51 orders to be delivered over the next five years, equivalent to 6% of the fleet. But this compares to an ageing fleet profile of more than 200 vessels that will reach the age of 20 or older within the same time period. This means the potential for fleet exits by far exceeds additions.

Looking ahead into Q2 and beyond, the VLCC freight market looks set to continue to build on the solid foundation of cargo volumes that has persisted from last year and into this year. Recent headlines also point to both China and the US – the world’s biggest oil consuming nations – signalling the need for more oil than expected this year, driven by rising manufacturing activity and stronger-than-expected economic conditions. There is further upside ahead if the OPEC+ alliance begins to unwind production cuts, which many analysts and forecasting agencies see as a likely scenario going into the latter part of the year. Until then, the geographical mismatch between where oil demand is growing and where new supply will arise will continue to add to the tonnemile equation and to the demand for VLCC tonnage.