& TANKER MARKETS 2H 2020: Charting the course ahead August 12, - - PowerPoint PPT Presentation

&

TANKER MARKETS 2H 2020: Charting the course ahead

August 12, 2020

Your presenters

2

Arthur Richier

Senior Freight Analyst - Vortexa

Anoop Singh

Regional Head of Research - Braemar ACM

Introduction to Vortexa

3

An analytics provider for the oil & gas industry. Produces real-time, global detailed waterborne cargo flows. Blends AI driven models and human intelligence Used by analysts, physical traders, financial players, consultancies and PRAs to get forward-looking market view.

4

Introduction to Braemar ACM

• Transactions & capital raising
• Restructuring
• Asset and loan management
• Insolvency advisory
• Port agency
• Hub agency
• Liner agency
• Logistic services
• LNG services
• Vessel design
• Commissioning supervision
• Chartering
• Sale & purchase
• Freight derivatives
• Valuations
• Research
• Adjusting & Marine surveys
• Offshore energy marine warranty services (MWS)
• Expert witness & consultancy
• Salvage and wreck removal

1

5

Agenda

Key Messages

6

The tanker freight market went from boom to bust as ton-mile demand collapsed with recovery now an uncertain prospect across tanker classes Unique market conditions that led to a floating storage bonanza were not sustainable in the long-term and were unable to maintain rates at yearly-highs with all eyes now on the drawing down of inventories Demand will take time to recover to pre-COVID levels and in the meantime, may continue to fall further in specific regions with China and the US remaining key influences across both stock draw-downs and imports

Markets are off their highs, with FFAs regaining some strength

7

Spot Earnings FFA - VLCC TD3c

10 15 20 25 30 35 40 12-May-20 27-May-20 11-Jun-20 26-Jun-20 11-Jul-20 26-Jul-20 10-Aug-20

$k/day

Q1-21 Q2-21 Bal Q3 20 Q4-20 50 100 150 200 250 300 350 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 $k/day VLCC – TD3c MR – Atlantic Basket

VLCC North Sea – China

• 68%

LR2 MEG – Japan 19% Suezmax WAF – UKC

• 35%

MR UKC – USAC

• 7%

Ton-mile demand across benchmark routes

8

10 20 30 40 50 60 70 80 90 100 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Mn Bpd Dirty (bpd) Clean (bpd) Crude/Condensates (bpd) Seasonal -12m

Global crude and refined products arrivals

9

• 10%

A long road back to recovery in oil demand loss from the Covid-19 pandemic

10

Global oil demand Oil demand outlooks

77.9 78.7 80.2 83.3 84.7 85.6 87.1 86.3 85.5 88.3 88.9 90.2 91.9 92.9 94.9 96.1 97.7 99.1 99.8 91.7 97.4 70 75 80 85 90 95 100 105 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 m b/d 80 85 90 95 100 105 110 2019 2020 2021 2022 2023 2024 2025 m b/d Current forecast (IEA and Braemar ACM) pre-covid IEA

Floating storage: when does the ‘great unwind’ happen ?

11

Global crude floating storage (mn bbl) Global crude stockbuild from start of 2020 (mbbls)

50 100 150 200 250 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Asia Europe North America Others China

20 40 60 80 100 120 140 160 180 100 200 300 400 500 600 700 800 900 1,000 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 crude in floating storage (>7 days) global crude stock change since Jan 2020 (LHS)

Assumes production in Libya does not recover and Venezuela remains at 0.4m b/d

Refinery runs to recover to 2019 levels in the East of Suez by mid-2021 with crude imports likely to be slower to recover

12

Refinery throughput - Asia ex Middle East (m b/d) Select East of Suez crude imports (m b/d)

24 25 26 27 28 29 30 31 32 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5-year range 2019 2020 5-year average 2020 forecast 2021 forecast 2.0 2.5 3.0 3.5 4.0 4.5 5.0 10.0 11.0 12.0 13.0 14.0 15.0 16.0 Q 1

• 2

1 9 Q 2

• 2

1 9 Q 3

• 2

1 9 Q 4

• 2

1 9 Q 1

• 2

2 Q 2

• 2

2 Q 3

• 2

2 Q 4

• 2

2 Q 1

• 2

2 1 Q 2

• 2

2 1 Q 3

• 2

2 1 Q 4

• 2

2 1 North Asia (Ch/Jp/Kr) India (RHS) SE Asia (RHS)

Decline in West of Suez refinery throughput accelerated by the Covid-19 pandemic

13

Refinery throughput - Europe + Americas (m b/d) West of Suez Crude imports (m b/d)

20 22 24 26 28 30 32 34 36 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5-year range 2019 2020 5-year average 2020 forecast 2021 forecast 2.0 2.5 3.0 3.5 4.0 4.5 8.0 9.0 10.0 11.0 12.0 13.0 Q 1

• 2

1 9 Q 2

• 2

1 9 Q 3

• 2

1 9 Q 4

• 2

1 9 Q 1

• 2

2 Q 2

• 2

2 Q 3

• 2

2 Q 4

• 2

2 Q 1

• 2

2 1 Q 2

• 2

2 1 Q 3

• 2

2 1 Q 4

• 2

2 1 Europe North America (RHS)

There is more to fleet growth than orderbook and ageing fleet

14

Uncoated tanker fleet development Dirty trading tanker fleet growth

10 20 30 40 50 60 70 80 Q 1

• 2

1 8 Q 2

• 2

1 8 Q 3

• 2

1 8 Q 4

• 2

1 8 Q 1

• 2

1 9 Q 2

• 2

1 9 Q 3

• 2

1 9 Q 4

• 2

1 9 Q 1

• 2

2 Q 2

• 2

2 Q 3

• 2

2 Q 4

• 2

2 Q 1

• 2

2 1 Q 2

• 2

2 1 Q 3

• 2

2 1 Q 4

• 2

2 1 m dwt Headline fleet growth Active fleet growth

Scrubber r’fitting Floating storage Sanctions and arrests

20 40 60 80 100 120 140 160 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 # of vessels Panamax Afra Sz VL 7% of fleet

• rderbook

= 9% of fleet

On order

Dirty tanker supply and demand do not balance before 2022

15

Quarterly dirty tanker tonne-miles and cargo volumes Annual dirty tanker demand and supply growth

36.5 37.0 37.5 38.0 38.5 39.0 39.5 40.0 40.5 41.0 770 780 790 800 810 820 830 840 850 860 Q 1

• 2

1 9 Q 2

• 2

1 9 Q 3

• 2

1 9 Q 4

• 2

1 9 Q 1

• 2

2 Q 2

• 2

2 Q 3

• 2

2 Q 4

• 2

2 Q 1

• 2

2 1 Q 2

• 2

2 1 Q 3

• 2

2 1 Q 4

• 2

2 1 m b/d billion Tonne-miles (LHS) Crude imports (RHS)

• 2.8%
• 0.9%

4.9%

• 2.3%

8.1%

• 0.3%
• 0.6%

1.7%

• 0.6%

2.3% 1.7% 0.5%

• 4%
• 2%

0% 2% 4% 6% 8% 10% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Base demand growth Active fleet growth

Summary

16

High stocks will delay a recovery of demand from translating into a recovery in tanker freight markets Active fleet will grow much faster than the suggested headline numbers With demand well below year-ago levels and supply likely to be larger as floating storage unwinds, the seasonal winter freight spike is likely to be capped this year

Questions?

17

Thank you

Arthur Richier

arthur.richier@vortexa.com

Anoop Singh

anoop.singh@braemar.com