Freight rates to carry a 60,000 mt clean petroleum product cargo from the UK Continent to West Africa on a Long Range clean tanker strengthened to a three-year high of $22.88/mt on Wednesday, a level not reached since August 18, 2015, S&P Global Platts data shows.
WAF has been the main headline of this month’s activity in the LR clean tanker markets. The Medium Range clean tanker markets saw similar price rises, having been assessed at $30.50/mt on Wednesday, the highest since November 17, 2015, when it was last assessed at $30.95/mt.
“Delays in the US Gulf are keeping a lot of MR tankers there, hence LR tankers are filling the gap,” a London-based shipbroker said.
Strong gasoline and gasoil demand over recent weeks contributed to the increased demand for tankers going to the West African region.
Nigeria is likely looking to keep offshore gasoline supply topped up as the country approaches a general election in February. Nigeria currently has around 2.6 billion liters of gasoline in stock, enough to cover at least 52 days of consumption, the Nigerian National Petroleum Corporation said.
Similarly, ahead of the presidential election, the NNPC has been supplying the local market with gasoil cargoes to keep retail prices low, sources said.
In addition to the existing demand from NNPC, demand from private importers also increased following the drop in ICE low sulfur gasoil flat prices over November. This, in turn, supported 0.3% gasoil price differentials in the region and ultimately the freight rates for clean tankers from the UKC to WAF.
However, market participants said the West African gasoil market came under pressure from local financing problems. Traders said lower crude oil prices meant Nigeria witnessed smaller inflows of foreign income, in turn limiting the amount of dollars available for the letters of credit.
Additionally, demand is expected to fall in the medium term as high freight rates mean higher prices for end-consumers. One trader active in the region said that “with the holidays around the corner, we may not see the effects [of higher freight rates on demand] until January.”
This added to an overall bearish outlook on the West African gasoil complex with possible knock-on effects for MR and LR freight rates over the coming weeks.