05-08-2017

Shell's Pernis fire ups Asia-Europe gasoil, jet traffic; freight spikes

LRT

Freight rates for Long Range tankers loading in the Middle East and the west coast of India are on the rise, as demand continues to increase in the aftermath of the fire accident at Shell's refinery in Pernis, near Rotterdam, market participants said on Friday.

Close to 10 LR1 or LR2 cargoes of jet fuel and gasoil for loading mostly in the Middle East have either been covered this week or are still outstanding, with an option for delivery into Europe, shipping industry sources said.

Some more of such requirements may have been covered privately or in ships belonging oil majors. LR1s and LR2s typically load cargoes of up to 65,000 mt and 90,000 mt, respectively.

Shell, Vitol, PDC, Chevron, Glencore and ATC are among those major trading and refining companies scrambling to cover their requirements for jet fuel or gasoil in LR ships and providng a strong support to the freight rates.

"Rates for loadings in India and the Persian Gulf for westbound cargoes are on fire," said a chartering executive in Singapore.

The key LR2 freight rate for the Persian Gulf-to-UK Continent route was assessed at $1.8 million on Thursday, up almost 25% so far this week and its highest level in over six months, S&P Global Platts data showed.

The corresponding LR1 rate was assessed at $1.325 million, a level not seen since end-March and up more than 15% from Friday last week.

"The sentiment is very strong for all sizes of ships and we will see more [cargoes] pointing towards the West now," a source with a clean oil tankers owner said with reference to the fire in Pernis. "It's another busy day," said a source with another owner.

Among the outstanding cargoes, PDC is seeking an LR1 for mid-August jet fuel loading on the Persian Gulf-to-Japan route, sources said.

"The arbitrage is working to move gasoil into the Mediterranean," said a shipping broker in Copenhagen.

"Earlier, the Mediterranean was pulling gasoil from the US Gulf but now the focus is on sourcing from the East," the broker said.

Among the fixtures heard, the Front Cougar was placed on subjects by ENI at $1.7 million for gasoil loading later this month on the Persian Gulf-to-Mediterranean route, sources said.

ATC has chartered a Navig8 LR2 for loading a 90,000-mt gasoil parcel in the Persian Gulf, with an option to deliver it in either Europe or Singapore. The freight for the UK Continent is around $1.8 million.

The refinery in Pernis is Europe's biggest, with an overall capacity of 404,000 b/d. A Shell spokesman said on Tuesday that the refinery could be restarted "at the earliest in the second half of August." This has prompted companies to lift more cargoes from Asia.

Vitol is seeking an LR2 for August 17 gasoil loading on the Persian Gulf-to-East Africa route, shipping brokers said, adding that Glencore's shipping arm ST Shipping plans to load a gasoil cargo from Yanbu in late August for delivery into Europe.

With the tightening supply of LR2s, for loading later this month, some of the companies are now scouting for LR1s.

Both Shell and Vitol have chartered an LR1 each for August 14-18 loading of jet fuel in Qatar and Ruwais, respectively, sources said.

On Thursday, Chevron quoted for a gasoil cargo, seeking an LR1 for loading in the Persian Gulf, with options to take the cargo to either Europe or East Asia.

Vitol has also placed on subjects an LR1 -- the Athina -- for August 16 gasoil loading on the Vadinar-to-Singapore route.

Source: Platts 

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