Conclusion
The crude tanker supply outlook is the best in over a decade with VLCCs leading the bullish outlook. This isn't something to gloss over as the larger vessels typically set the tone of the market and are responsible for the majority of the market volatility due to their more pronounced demand elasticity.
The VLCC market handled the influx of vessels much better than expected, but external factors contributed to this success. The removal of the NITC and COSCO tankers created a supply shift and they are now at the mercy of political gamesmanship. With rhetoric and tensions increasing, this might not be solved anytime soon.
Having absorbed the majority of 2019's deliveries, the VLCC market is facing a downright thin orderbook where deliveries pale in comparison to previous years. Suezmaxes and Aframaxes are also set to benefit from thin orderbooks which will also see deliveries slow in comparison to previous years.
Newbuild orders remain subdued in the more capital-intensive VLCC class and will likely remain that way until we see some sort of economic clarity regarding IMO 2020. After that, a possible ordering spree could emerge, however; the market would benefit greatly by owners exhausting the second hand market first and foremost.
Demolitions are a function of economics. As long as rates are high and OPEX costs (increasing bunker costs) are able to be covered with profit to spare retirements will wane. Let's also not forget that older vessels are typically unencumbered.
While few demolitions are not really great news in the short run, we can look at it like the market is building up its insurance policy for the future. These older vessels, if rates take a dive, can act as a relief valve for the supply side. The older the overall age profile of the fleet - the greater the relief valve.
The lengthy nature of the shipbuilding process, especially for the VLCC class, has the orderbook through 2022 pretty firmly set in stone, and it looks very bullish.
With a bullish supply side setup now in place our attention should now turn more toward crude demand, trade flows, stockpiling, and owner's ordering patterns as potential main disruptors for the market.