Oil shipping sector heading for downturn: Teekay

BANGALORE (Reuters) – Even as the world economy comes out of a recession, the worst is yet to come for the oil shipping industry as it struggles with increasing supply of ships and weak demand, a senior official at Teekay Corp (TK.N) said.

“I think we are just in the early stages of a downturn for the shipping markets. The unique characteristic about the tanker market especially is the lag effect,” Bruce Chan, president of Teekay Tanker Services, said in a interview with Reuters.

Charter rates for oil tankers were relatively strong through to the first and even the second quarter of 2009, and they have really been depressed only in the last couple of quarters, which really shows the inherent lag effect, Chan noted.

“While the economy may be recovering it’s really about the translation of that into oil demand,” Chan, who has been with Teekay for the last 14 years, said.

That said, Chan believes the real challenge for the tanker industry is not the depressed oil demand but the new ships that are set to come online.

Reuters