OPEC + acts in the most responsible way and the situation in Q4 is dramatically different from the first lock down in Spring. Although airlines are still at a standstill and airports having 20% to 30% of the usual traffic, the Surplus of Jet fuel is being mixed with diesel and used by ships. Oil demand has recovered to 90% of normal and inventories are going down, although not as fast as some expect.
We expect an oil supply shock next year as since 2014, the capex dedicated to new conventional barrels has been at a record low. This should mean that the marginal barrel will come from Deep Offshore and we shall see a recovery of the oil services sector, in particular the vessels dedicated to this industry.
In the meantime, LNG is doing well. The FLEX LNG results were encouraging this morning and the day rates are well established above $100,000. This is our favourite story with modern 2 stroke engine vessels mostly on the spot market. The switch of CHINA/INDIA from coal produced electricity to Gas, a real game changer as far as CO2 is concerned is the main catalyst behind the momentum of this trade for at least the next ten years.
A 1% switch in China means 20 million tons of LNG needed per year or the entire capacity of Artic II. This bodes not only well for LNG Engineers and in particular French company” Gas Transport and Technologie” ( GTT FP) but also for LNG Tankers.
Another are of interest in shipping is the segment of WTIV or Wind Tower Installation Vessels. There shall be 19,000 towers to install offshore in the next ten years. The company OHT, quoted in Oslo, is at the moment answering many auctions as there is a shortage of these vessels. This is what SCORPIO BULKERS has identified and if they succeed in selling their bulkers to buy WTIV, it is going to be a real success story.