The effects of Hurricane Harvey continue to reverberate through the Asian LR tanker market, with TC1 and TC5 rates surging by w17.5 and w14 points w-o-w to w115 and w135 respectively. With many ships taken on long-haul voyages from Asia and the Middle East to Europe and Americas, the position list has tightened considerably. Furthermore, at least 3 LR2s were taken for short-term charters ranging from 30 to 90 days to store gasoil this week, boosting firm market sentiment. Around two LR2 and ten LR1 vessels are available for loading in the AG over the next week.
US refinery outages as a result of Hurricane Harvey has left Europe with no choice but to pull diesel and jet fuel from Asia and AG to meet the supply gap. EIA data indicates that weekly US diesel exports hit a 6-year low of 739 kb/d for the week ending 1 September, greatly reducing flows to Europe. Around 1.84 mmt of middle distillates for September loading in Asia and the Middle East have been tentatively booked with an option for delivery into Europe so far, underpinning the strength in LR rates. In comparison, around 3 mmt of middle distillates were shipped from Asia and the Middle East to Europe for August loading following the fire at Shell’s Pernis refinery.
Diesel supplies in Europe have been tight, with PJK data indicating that gasoil inventories in the ARA region for the week ending September 7 are 20.4% lower y-o-y at 2.74 mmt. The gasoil EFS hit its lowest all year at -$18.99/T last Friday as the East-West arb is increasingly profitable.
Source: OFE Insights