Americas Medium Range tanker freight values have declined to lows last seen during the 2016 US Gulf Coast fall refinery maintenance season, with the cost of carrying clean petroleum products from the USGC to East Coast Mexico indicated Wednesday at $140,000 lump sum, or $3.68/mt, and freight on the USGC-transAtlantic run down to Worldscale 70, or $9.65/mt.
Time charter equivalents at these levels have clearly turned negative. On a roundtrip USGC-UK Continent basis at w70 a shipping analyst estimated the TCE at minus $2,651/d, but on a triangulated basis with the UKC-US Atlantic Coast trip at w130 the TCE is estimated at positive $4,504/d.
Yet freight on long-haul routes to Latin America faired comparatively better amid a contained strong pull of ULSD and gasoline volumes to Brazil, Argentina and Chile.
Freight on the USGC-Chile run was indicated at $900,000 lump sum, or $23.68/mt, while freight to Brazil traded at Worldscale w130, or $17.59/mt, 9.1% and 16.3% higher, respectively, than during last fall’s low point on these routes.
“I am thinking that the USGC refineries are utilized at lower levels and production is used locally and so there is nothing for export,” a shipowner said. “Usually we have a surplus production of ULSD which goes to South America and we don’t see that happening right now.”
USGC refineries ran at 73% for the week ended September 15, up 12.3% from the previous week but at the lowest level since September 26, 2008, according to the latest data from the Energy Information Administration.
Refinery utilization had been severely impacted by Hurricane Harvey, which shut more than 4 million b/d of Texas refineries, or 22% of total US refining capacity, S&P Global Platts estimated immediately after the storm.
Last week, refinery runs increased by 1.1 million b/d and the gain took place entirely on the USGC, EIA data showed.
“Although this is a significant step upward from the amount of capacity that was offline at the peak, runs in PADD 3 are still 2.4 million b/d below the August average,” said Jenna Delaney, senior oil analyst, PIRA Energy, a forecasting and analytics unit of Platts. “Refinery restarts are expected to be persistent, but gradual, in the weeks to come.”
Gasoline and distillate inventories showed a draw of 5.7 million barrels and 2.1 million barrels, respectively, causing stocks to fall below the level for the same week in 2015 for the first time this year, EIA data showed.
“Gasoline inventories typically tick upward during this time of year as demand slackens, but refinery closures in the Gulf Coast have caused a break from that trend,” Delaney said.
For Americas MR tanker markets this caused an abundance of available prompt tonnage amid a noticeable lack of export activity.
“No cargoes are waterborne right now,” the shipowner said. “The shipping market will take some time to pick up again.”
Another shipowner explained the seemingly ceaseless bearish trend as “way too many natural positions.”
On the USGC, the shipping analyst assessed two-week forward tonnage availability at 57 vessels, considering that units on the US Atlantic Coast could sail either to the USGC or trans-Atlantic. Others counted approximately 20 prompt positions and another 50-55 units through to September 29, assuming that all tonnage on the USAC ballast to the USGC.
“The concern is that we are approaching the fourth quarter, which is traditionally refinery turnaround season,” the first shipowner said.
Pointing to the usual low point of Americas clean freight markets, the shipping analyst explained, “it is a bit like an extremely strong fall maintenance period.”