08-09-2016

Tankers: Medium Range freight rates on NWE-USAC route hit more than 7-year low

Tankers

Freight rates for Medium Range tankers operating between Northwest Europe and the US Atlantic Coast, basis 37,000 mt, hit the lowest level in more than seven years Tuesday, with ballasters continuing to sail in Europe and a closed gasoline arbitrage, shipping sources said Wednesday.

S&P Global Platts data shows that MR tanker freight rates on the route fell by 36 cents to $11.43/mt, or Worldscale 77.5. This would be the lowest assessed level since April 21, 2009, when the freight rates hit $10.86/mt.

While a few shipowners said the market rate on the NWE to USAC route, basis 37,000 mt, was at w80, shipbrokers said it is possible rates might edge down further, given that the gasoline arbitrage is closed and there are a lot of ships with hidden positions in Europe.

Spot-market arbitrage flow to the US Atlantic Coast has been limited, sources said, with the summer driving season drawing to a close and the transition to higher-Reid Vapor Pressure gasoline set to kick in mid-September in the US wholesale markets.

Values for the September USAC-UKC arbitrage spread swap — which tracks the relative value of NYMEX RBOB gasoline futures to Eurobob gasoline swaps and is a measure of the openness of the arbitrage — remained almost flat, while the October contract was heard around the 4.50 cents/gal mark at the European close Tuesday.

“The market is a bit softer,” said one gasoline trading source.

Looking forward, shipowners said that, while freight rates had hit rock bottom on that voyage, they are likely to stabilize at this level.

“It’s true the levels [freight rates] are really bad, and I don’t massively expect any rebound in the near future. We are going to float around w80 [for the NWE-USAC trip for the rest of the year],” one said.

Another shipowner said that for the “basket route” — NWE-USAC and back — earnings were $5,000 per day which were “just enough to cover the operating costs.”

In outright prices, Eurobob summer-grade gasoline barges were assessed at $455.25/mt Tuesday from $456.25/mt Monday.

Source: Platts 

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