16-09-2016

Tankers: Americas clean MR freight spikes 33%-40% on Colonial Pipeline troubles

Tankers

Americas Medium Range clean tanker freight rates on the US Gulf Coast-trans-Atlantic and USGC-Caribbean runs, have spiked 33% and 40%, respectively, since Monday after a leak on the Colonial Pipeline pushed barrels waterborne and charterers positioned to move light and middle distillates from USGC refinery terminals.

Colonial Pipeline’s Line 1, the main artery pumping gasoline from the USGC to the USAC, had a leak in Alabama last Friday which closed the line. To avoid product building in the Gulf Coast, demand increased to move product to offsite storage locations as well as to mainly trans-Atlantic and Caribbean destinations.

According to S&P Global Platts Medium Range tanker data freight on the USGC-UK Continent run rose 33% from $9.29/mt this Monday to $12.39/mt Wednesday, while the USGC-Caribbean voyage rose 40% over the last two days from $6.58/mt to $9.21/mt.

Position lists rapidly tightened amid heavy fixing activity, as charterers were looking to find waterborne alternatives to moving USGC gasoline on the Colonial Pipeline for loading by September 20-21.

“A lot of refiners panicked a little bit,” a distributor said when explaining that Jones Act barges had been chartered to move products to offsite storage locations from water-in/water-out terminals on the USGC. Traders were heard positioning themselves mainly on USGC-Caribbean and USGC-trans-Atlantic runs to take advantage of lower gasoline values for product loading during the second decade of September.

“September 18/20 — whatever the owner wants — after that, $350,000,” a broker said when gauging values for the USGC-Caribbean run.

“With the pipeline scheduled to be back online this weekend, continued inquiry at this rate could be short lived,” another broker cautioned.

A shipowner surmised that he would like to get his ships fixed prior to the weekend, as a lot of vessels may be failed come next Monday.

Gasoline prices have started to rebound, as the Colonial Pipeline started to move gasoline via Line 2 from the USGC up to Atlanta, where it will be fed into Line 1. The entire system is scheduled to restart this coming weekend, according to the pipeline company.

Distillate prices originally fell following news that some gasoline would be shipped on the distillate Line 2, with fears that allocations would be cut on the line. However, Colonial clarified that nominations would not be affected, and prices continued to rebound throughout the week.

On Wednesday, Platts assessed Gulf Coast ULSD at NYMEX October ULSD futures minus 3.25 cents/gal, up 75 points/gal from Tuesday. While the basis strengthened, a bearish stock report from the US Energy Information Administration that showed US ULSD stocks reached their fourth-highest level ever and caused the NYMEX futures contract to fall more than 4 cents/gal.

With the move down, the export EN590 ULSD assessment shed more than $12/mt to $400.77/mt, while CIF NWE ULSD was assessed at $409/mt.

Close to 20 Medium Range vessels with trans-Atlantic options have been placed on subjects by refiners and trading companies, including ATMI, BP, Cargill, Exxon, Koch, Trafigura, and Valero for loading by September 20th. This caused freight rates for vessels loading during the front end of the position list to carry a premium over third-decade September laycans.

In trans-Atlantic markets, there was talk that activity could pick up on the UKC-TA route, but with the pipeline scheduled to be back online this weekend, continued inquiry could be short-lived.

Source: Platts 

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