Ship, baby, ship! The Port of Vancouver’s (PoV) 2024 crude oil clarion cry will be music to the ears of anyone banking on diversifying Canadian petroleum exports to non-U.S. markets.
But a curb-your-crude-enthusiasm chorus threatens to spoil the outbound oil shipping party in 2025.
Data in the Vancouver Fraser Port Authority’s March 10 release of the PoV’s 2024 cargo numbers shows a 527% spike in crude oil throughput compared with 2023. More than half of that Canadian oil went to Indo-Pacific markets.
Canadians can thank the Trans Mountain pipeline expansion for that 2024 energy export boom.
However, they’d be incurable optimists to expect that boom to continue with the same volume in 2025.
Crude oil faces the same upward spiral of geopolitical tariff and trade turmoil that is destabilizing world markets for other commodities. But it also has some sector-specific challenges.
For example, as ING points out, oil consumption in China is decreasing following strong demand growth.
“A key reason being the rapidly increasing electric vehicle (EV) fleet,” the Dutch multinational financial services company notes in its March global shipping report.
Meanwhile, Anshika Prajapati, senior tanker analyst for U.K.-based shipping consultancy Drewry, says the crude market is also oversupplied.
Her outlook for 2025: “We expect that the global oil demand will improve only by 1.1% in 2025.”
ING’s outlook is slightly less optimistic. It forecasts a “mild growth trajectory of 1% year on year.”
That is below the average annual pre-pandemic growth of 1.5%.
A 5% increase in petro-product tanker capacity is also expected to be added to the global fleet in 2026.
Geopolitical tensions have lengthened voyage times and increased fuel and other shipping costs by rerouting east-west tankers, container ships and other commercial vessels around the Cape of Good Hope to avoid Red Sea-Suez Canal security risks.
That rerouting has absorbed shipping capacity across the board.
A decrease in those tensions and a rise in shipping’s return to the Red Sea-Suez Canal trade route will shift the current supply-demand balance into oversupply, especially if it is accompanied by an influx of capacity from new tankers.
Rates will drop.
A resolution to the Russia-Ukraine war would also increase global crude oil surpluses and drive rates down further.