Tanker shipping focuses on outcome of US election (source: Lloyd’s List)

The trade and energy policies of the next US government could significantly vary from the Donald Trump administration if the Democrat candidate Joe Biden wins the White House

The US presidential election is the ‘biggest variable’ for the prospects of energy shipping sector, says state giant China Merchants Energy Shipping. The view is echoed by shipbroker Gibson, which believes the change of presidency could bring ‘fundamental shifts’ to the tanker and oil markets

THE result of the US presidential election could significantly alter the path of crude tanker shipping, according to  the world’s largest very large crude carrier owner.

Shanghai-listed China Merchants Energy Shipping, which owns 51 VLCCs in service among many other vessels, pointed to political uncertainties in the US as “the biggest variable for the international energy transport markets in the next few years”.

“Whether Donald Trump can retain the presidency after the November election? And there is a lack of clarity on the foreign, trade and energy policies of the next US government,” the company said in an exchange filing. It said the frosty Sino-US relationship could also be affected by the outcomes.

It is a view shared by a recent Gibson report, which said a change of power in the White House could bring “some fundamental shifts” to the oil and tanker markets.

“Most important, perhaps, is the Joe Biden pledge to focus on clean energy to fight climate change,” said the brokerage.

The energy plans unveiled by Democrat lawmakers require the US to bring its net greenhouse gas emissions down to zero by 2050.

Among other efforts, power producers are asked to achieve net zero emissions by 2040, while oil and gas companies will be forced to phase out routine flaring. US automakers will also only be allowed to produce electric cars from 2035 onwards.

“In contrast, President Trump was quoted as saying to ‘never let the great US oil and gas industry down’,” Gibson added.

It also noted that Chinese charterers have booked tankers for August and September loadings from the US as part of the efforts by Beijing to fulfil the Phase One trade deal signed with Washington in January.

At least 12 VLCCs have been provisionally reserved to load 835,000 barrels per day at the Gulf coast next month for China, a sharp rise from just 450,000 bpd in July and 660,000 bpd in June, brokers have reported.

Other variables that could alter tanker shipping’s fortune include further developments in the coronavirus backdrop, the execution of the 23-nation Organisation of the Petroleum Exporting Countries-plus alliance production cut agreement and the effectiveness of the stimulus packages unleashed by the world’s major economics, according to CMES.

In the shorter-term, however, the expectation on the bullishness in the fourth quarter — the traditional peak season for tanker shipping — was still “quite high”, said the Chinese owner.

CMES, the tanker and dry bulker arm of state conglomerate China Merchants Group, saw its net profits in the first half of the year surge 378.9% year on year to more than Yuan3bn ($435.7m).

The surplus in the second quarter stood at Yuan1.8bn amid a sizzling tanker market — led by the VLCC segment — nearly 20 times of the year-ago level.

Tanker earnings, however, have largely weakened since the second half owing to the output cuts by the major oil producing countries and the retreat of the oil contango market, said CMES.

Daily VLCC rate on the TD3 Middle East-China route has dropped to about $15,000 from the previous heyday level of above $300,000.