Weak freight rates in the spot Americas clean tankers market are prompting shipowners to swallow negative Time Charter Equivalent earnings on US Gulf Coast-Trans-Atlantic runs in order to take advantage of opportunities related to gasoline runs between the UK Continent and the US Atlantic Coast, sources said.
It has created a “you win some, you lose some” attitude among shipowners, sources said.
Time Charter Equivalent earnings for Medium Range tankers on the USGC-TA run were estimated to be minus $584/day Monday, according to a weekly report.
Freight for Medium Range tankers on the USGC-TA route bottomed out at Worldscale 77.5 between March 15 and March 19 before starting to pick up. S&P Global Platts assessed the route unchanged day on day at w82.5 Thursday.
Freight for Long Range 1 tankers on the USGC-TA route reached its lowest level since February 7, with Platts assessing the route at w72.5 Thursday.
An estimated 22 ships sailed the eastbound route so far in March, according to data from Platts cFlow trade flow software.
US Energy Information Administration data for the week that ended March 16 showed US gasoline stocks fell due to improved US gasoline demand. US gasoline stocks fell 1.693 million barrels in the most recent reporting week to 243.065 million barrels, according to the EIA.
Northwest Europe gasoline flows to North America were estimated to be up to 1.41 million mt so far in March, according to data from cFlow.
The opposite was true across the Atlantic, where gasoline inventories at the Amsterdam-Rotterdam-Antwerp hub were long, according to PJK International. Inventories at the hub rose 26,000 mt, or 2%, to 1.309 million mt in the week that ended March 14, data from PJK International showed March 16.
As such, the arbitrage set the stage for increased vessels making the trans-Atlantic voyage.
“Europe to USAC hasn’t been nearly as bad as the USGC to Europe as far as earnings go,” a source said Thursday. “And the use of LR1s is bullish for diesel/jet, but not bullish for freight.”
Most recently, fixtures reports showed Exxon putting the LR1 Torm Sara on subjects at w72.5 to carry jet fuel for April 1 loading at Baton Rouge and Lukoil putting the LR1 Maribel on subjects at w62.5 for carrying gasoil after a March 25 loading on the USAC.
Not all shipowners were jumping at the idea of taking low trans-Atlantic earnings to secure higher earnings on the back haul.
“I’ll agree there is interest in LR1s, for sure, but these earnings are so low I’m not sure I’d send a ship across for them,” a second source said Thursday.
The weak freight price environment, under pressure from supply and demand fundamentals, is due to an excess of tonnage and low stem demand.
The lack of cargoes is allowing charterers to secure lower bids as shipowners fight to keep their ships moving.
The stage for the weakness in freight prices was initially set by bad weather along the USGC.
At the start of this week, charterers lost marginal leverage as prompt tonnage piled up and owners were able to secure higher prices.
Position lists viewed by S&P Global Platts counted seven prompt ships along with an additional 30 to be firmly available for loading in the USGC within the next 10 days.
Refined product exports averaged 4.993 million b/d in the week that ended March 16, compared with 5.162 million b/d in the week that ended March 9, EIA data released Wednesday show.
Despite a fall in exports, refinery utilization reached 91.7% in the week that ended March 16, up 1.7% compared with the previous week, the data showed.
Source: PlattsPrevious Next
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