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MJLF Research

MJLF Research. Tanker Supply and Demand. Intertanko. TANKER MARKET UPDATE. March 17 th , 2014. Global Macro Picture Dirty Tanker Markets Clean Tanker Markets Jones Act Markets. Macro GDP Estimate. Total global GDP is forecast to trend upwards through 2014.

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MJLF Research

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  1. MJLF Research Tanker Supply and Demand Intertanko TANKER MARKET UPDATE March 17th, 2014

  2. Global Macro Picture • Dirty Tanker Markets • Clean Tanker Markets • Jones Act Markets

  3. Macro GDP Estimate • Total global GDP is forecast to trend upwards through 2014. • Emerging economies require more oil as their GDP grows than advanced economies. • Advanced economies are maintaining oil demand despite expectations of tapering. Source: IMF

  4. Total Global Demand Projected • Daily demand was at 92.1 mnbbls/d in January of 2014. • Total Global Demand is forecast to rise through 2016 to above 95 mnbbls/d, many of these additional barrels will move on tankers. • Peak demand is expected at approximately 100 mnbbls/d. Source: IEA

  5. MJLF Research Tanker Supply and Demand Dirty Product Tanker Markets

  6. MJLF Research Tanker Supply and Demand Dirty Product Market Highlights • US crude oil production is shifting markets and creating new trade patterns. • Chinese demand is the main driver of the VLCC markets, however, OECD demand has been stronger than expected in 2014. • Seasonality of rates returned in 2013 after weak markets in 2012, with all segments seeing a substantial rate spike at the end of the calendar year.

  7. MJLF Research Tanker Supply and Demand Time Charter Rate Trends

  8. MJLF Research Tanker Supply and Demand Fleet Size and Orderbook Source: Clarksons

  9. Current VLCC Fleet Size 2013 Final - 631 Projected Fleet Size 2014 – 652 2015 – 657 2016 – 667 Source: Lloyds

  10. VLCC Average Earnings Source: Clarksons, Wells Fargo Securities, LLC

  11. … But slow steaming is artificially capping the supply of ships. • During the late season rate spike for VLCCs in 2013, few owners expressed willingness to abandon slow steaming. • If there is a prolonged rate hike, charterers may demand a return to higher speeds.

  12. Fleet growth for larger tankers is expected to be modest in the years ahead as orders have been slower in the crude sector. • The rate volatility seen late in 2013 and in 2014 indicates a healthier supply/demand balance is returning, but the fleet remains very large by historical standards. Source: Baltic

  13. Current Suezmax Fleet Size 2013 Final - 430 Projected Fleet Size 2014 – 446 2015 – 456 2016 – 456 Source: Lloyds

  14. MJLF Research Tanker Supply and Demand Dirty Product Trends • Earnings in the first quarter of 2014 were impacted by global refinery turnarounds which are averaging 2.8mn bbls/d from Dec 2013 to April 2014. HOWEVER, overall runs are forecast to grow by 1.1 mnbbls/d (year on year) for the remainder of 2014 • Modest fleet growth in all dirty tanker market segments is positive for owners. • VLCCs and Suezmaxes will continue to experience dynamic rates in 2014, but average earnings will be only modestly higher than in 2013.

  15. The completion of the Panama Canal expansion is currently scheduled for end 2015 (stated) • The expansion will allow partially loaded Suezmax tankers to transit the Canal (110,000t-120,000t) and, thus, could potentially pose a threat to the VLCC sector.

  16. MJLF Research Tanker Supply and Demand Clean Product Tanker Market

  17. Clean Product Market Highlights • Rising US Gulf distillate exports to Latin America and Europe – US Refiners continue to add marginal capacity. • Growth in Asian and Middle East refining supercenters will lead to closures of smaller, inefficient refineries world wide. • Between 750-900,000 bbls per day of refinery capacity are slated for strategic review, ie closure, in Europe.

  18. Current MR Fleet Size 2013 Final - 1395 Projected Projected Fleet Size 2014 – 1468 2015 – 1577 2016 – 1602

  19. MR Average Earnings Source: Clarksons, Wells Fargo Securities, LLC

  20. Earnings were close to five year highs in 2013, but earnings have reverted closer to the average. • The US Gulf to Europe trade has seen earnings above the Europe to US Atlantic Coast run, which historically did not happen. • LR1s and LR2s have started loading in the US Gulf.

  21. Clean Product Trends • Panama Canal Expansion and the increase in the number of crude splitters (producing a large amount of naphtha) could increase the number of cargoes from the US Gulf to the Far East on LR1/LR2s. • The fleet growth in the MR and LR2 segments is projected to be fairly large from 2016 onwards, which may limit the upside to rate increases. • Abnormally cold weather in the US North East led to unexpected support for Europe to US Atlantic Coast rates early in 2014 as distillates were sourced from Europe.

  22. MJLF Research Tanker Supply and Demand Jones Act Tanker Markets

  23. US Crude Production

  24. USWC Rail Development • If all rail Terminals are built, 800 KB/d of capacity will be added exceeding regional refining throughput • Total USWC refining capacity is estimated at 2.8 MMB/d, w/ 1.75 MMB/d of capacity in California • As a result intra Pacific Northwest-California barge and tanker trade are forecasted to expand

  25. Texas Production + Pipe-In Capacity (Seaway + Cushing Market Link): 4.1 MMB/d • Pipe-Out Capacity: (HoHo + Permian Express + Centurion): 835 KB/d

  26. QUESTIONS? 300 First Stamford Place Stamford, CT 06902 +1-203-326-2800

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