Old World, New Patterns - European Oil Imports

In 2006, total European seaborne oil imports peaked at 15.3m bpd. Since then, imports have declined and are projected to fall to 13.7m bpd in 2013, the lowest level for a decade. Yet, while crude tanker demand into Europe has endured severe pressure since the recession, product tanker trades have enjoyed more positivity.Smaller Ships, Bigger Volumes Since 2001, a number of changes have been wrought on crude routes into the EU. Once a major route, volumes carried by VLCCs from the Middle East Gulf to Europe have declined by 59% between 2001 and 2012. Consequently, as shown by the Graph of the Month, VLCC demand generated by EU crude imports declined by 57% in the same period. Increasingly, Europe sourced crude from different areas. In particular, the opening of the Primorsk oil terminal in 2001 led to increasing Baltic crude exports. Coupled with growing Black Sea exports, European crude demand for Suezmaxes and Aframaxes expanded by 24% and 65% respectively between 2001 and 2008.
Recession Blues
The impact of the global recession had a profound effect on the European oil market. Between 2008 and 2012, EU oil demand declined by 10%, while European crude imports declined by 15%. As a result, Suezmax demand from EU crude imports decreased by 10% between 2008 and 2012, as crude cargoes ex-Black Sea to Europe declined by 27%. With over half their cargoes bound for Europe in 2007, Aframaxes suffered to an even greater extent, with EU-driven demand decl-ining by 3% per annum between 2008 and 2012; this would have been worse without the Primorsk crude exports. Aframaxes were further impacted in 2011 by the war in Libya, which removed a major supplier of EU crude imports.
Product of Pastures New
The European economic crisis has also led to a decline in EU refinery capacity, which is projected to fall to 15.0m bpd in 2013, representing a decrease of 5% since 2008. However, capacity closures have outpaced EU product demand weakness, helping European seaborne product imports, which increased by 6% between 2008 and 2012. Demand for ship types serving long-haul products trades from India and the US to Europe have increased by 108% in this period. EU demand for coated Aframaxes and Panamaxes increased by 73% and 40% respectively between 2008 and 2012. Similarly, increasing European diesel imports generated firm demand on the back-haul transatlantic route, with EU demand for MRs (part of the Handy fleet shown on the graph) increasing by 24% in this period.
Ultimately, the decline in importance of the MEG and the growth in exports from the Baltic and the Black Sea increased demand for Suezmax and Aframax vessels, leading to Aframaxes in particular being significantly exposed to the sharp decline in crude imports to the EU post-recession. Furthermore, the recession shifted European import growth away from crude imports and onto oil product imports, as EU refineries struggled to survive while operating at particularly weak margins. Crucially, the shift of EU crude imports onto shorter distance trades and of product imports onto longer trades has had a significant impact on the global tanker market.
Source: Clarkson Research Services