In International Shipping News 02/06/2017
Suezmax rates in WAF surged last week on the back of a jump in cargo volumes for 2nd decade June. Rates for TD20 spiked by a whopping w20 points on the week to a one-month high of w95 before easing to w87.5 as of today. We expect Suezmax rates to remain fairly elevated in the coming weeks as more WAF barrels are fixed for the Atlantic Basin.
While overall West African crude exports in June are expected to fall by 1.5% m-o-m, Atlantic Basin-bound voyages have been on an upward trend since April. West African crude moving to the Europe and US is typically loaded on Suezmaxes. As such, the number of WAF/UKC-US Suezmax fixtures reported in May grew by 50% m-o-m to 39 as refiners geared up for peak summer demand (in particular summer driving season in the US). Chinese demand for WAF crude has seen a lull since April on the back of lower purchases from teapot refineries which are undergoing heavy turnarounds as well as facing ullage and quota shortage issues from overbuying in Q1. More competitive LatAm and regional barrels following the lowering of Saudi Aramco’s June OSPs have also displaced some WAF crude imports into China.
This has weighed heavily on WAF crude differentials, attracting greater buying interest from refiners in Europe and the US. We expect the trend of more WAF crude moving to the Atlantic Basin to continue in the short term due to the open arb to the US, impending start-up of the Dakota Access Pipeline and return of Forcados exports. The Brent/WTI spread has narrowed significantly since March, making Brent-linked WAF crudes more attractive to US refiners. The start-up of the Dakota Access Pipeline will divert more Bakken crude to the USGC, leading to a potential shortfall on the East Coast which Nigerian crude may fill. More Forcados cargoes are expected to be available for export in the coming weeks after the restart of the 250 kb/d crude pipeline, which will increase cargo loadings from Nigeria.
