In Hellenic Shipping News 02/03/2015
A combination of factors now in play has contributed to a significant firming up of the transatlantic product tanker market this week. According to the latest weekly report from shipbroker Gibson, “the success of the US refinery system in the recent years has been supported by good relations with the trade unions. This, as well as the shale oil revolution, have allowed the nation to become a major exporter of products which has in turn has supported product tanker demand. As refinery strikes continue to spread across the US, the stoppages have so far had little impact on production numbers. The last weekly EIA report published last week shows increases in booth gasoline and distillate production although refinery utilization was down to 87.4% (-1.3%)”.
Gibson added that “at the time of writing efforts to resolve the four week old dispute, which covers several issues, have failed to come even close to a resolution. Most oil companies have contingency plans in place and have been using managers and engineers to keep plants running at near normal production levels. However, the strike situation was not helped when an explosion occurred at California’s 155,000 b//d Torrance refinery on the 18th February which was already offline for unplanned maintenance when the incident occurred”.
The London-based shipbroker noted that “last weekend the dispute escalated still further when the 600,000 b/d Motiva Enterprises refinery in Port Arthur, Tx., the largest US refinery, entered the stoppage. At the same time, two more Motiva refineries, the 230,000 b/d Convent and 238,000 b/d Norco both in Louisiana, also entered the fray. Latest reports emanating from the US indicate that 15 plants, including 12 refineries, 6,550 union members, are currently taking strike action over new 3 year contracts as well as issues over safety. The situation has been further exacerbated by sub-zero temperatures causing widespread disruptions in more than two–thirds of the US East Coast refineries last weekend. The Delaware River froze over preventing water draws for cooling systems at several locations, as well as restricting movements of shipping which will impact on production. Numerous other weather related incidents were also reported adding to the disruptions on the US East Coast and the extremely cold weather resulted in a significant draw (2.7 mln bbls) on distillate stocks”.
So has have the above developments impacted the tanker markets? Gibson said that “while it may be too early to say what impact all of the above will have on this week’s EIA data, the transatlantic product tanker market has certainly firmed. Strong chartering demand has kept brokers on their phones trying to secure tonnage and market rates have responded accordingly. TC2 rates gained more than WS75 toWS180 over the past couple of weeks on the back of strong demand to ship gasoil to the US, while TC14 charter costs moved up by WS35 to WS100 with increases in chartering activity out of the US Gulf as well. There is potential for more, particularly if the standoff between US refiners and unions escalate further and as such this situation should be monitored closely”, the shipbroker concluded.
Meanwhile, in the crude tanker market this week, in the Middle East, “it was a busier week for VLCCs, despite the remainder of the Holidays, but not sufficiently so to buck the previously softening trend so that rates chipped lower to the low ws 50’s East, and to wws 28 to the West via Cape. Next week should see a higher gear inn terms of volume, but the initial reaction is likely to be for more contraction until a finer balance is reachieved, perhaps for later in the month. Suezmaxes stayed quiet for longer East runs, and reasonable short-haul action couldn’t imp rove the weaker mood. Rates eased to around 1300,000 by wws 85 accordingly. There was a flurry of interest to the West, but that merely served to provide an arena for competition to force those rates lower, to ws 40 to Europe. Aframaxes saw something of a clear-out in the 80,000 by ws 1055/110 range to Singapore that sets things up for aa possible mild improvement next week.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
