LONDON: At the start of the month Gibson reported swelling product stocks in the ARA area, since the shipbroker’s report distillate stocks have surged to near record levels, whilst refining margins have come under increased pressure. At the same time product markets in the Atlantic Basin have remained subdued, with MR triangulation (TC2 + TC14) earnings of $13,750/day at the time of writing, propped up in effect by weak bunker prices.
According to Gibson, “following the end of the US driving season, refiners and tanker owners alike must now look to the winter for the next demand boost where increased demand for distillate as a heating fuel, most notably in the US and Northern Europe typically increases. However the strength of this demand response is heavily influenced by weather conditions. Whilst, weather forecasts can be notoriously cloudy, the consensus among many meteorologists is that a strong El Nino phenomenon in the Pacific will lead to a milder winter in the Northern Hemisphere, in particular the US North East – a key outlet for heating oil; the last thing refiners need if they are to run down their bulging distillate stocks”.
The shipbroker added that “in the US North East, 23% of homes use distillate as a source of winter heating. However, this winter, the EIA forecasts that US demand for heating oil will fall 11% lower than the year prior where prompt demand for trans-Atlantic distillate runs supported MRs in the region. Furthermore, distillate stocks in the North East are the highest since 2011, further restricting import demand. However, whilst the winter demand outlook may appear gloomy for product trade in the Atlantic, tanker owners may yet find a silver lining”.
Meanwhile, “recent reports suggest major charterers are securing tonnage to cover against potential product storage requirements. In addition, much of the operational inefficiencies witnessed in the crude sector in terms of handling the surplus (delayed discharge, forced storage) may already be emerging downstream in the products sector, with evidence suggesting a larger number of product carriers have recently struggled to place cargoes on the continent. Although rising water levels on the Rhine might allow for better inland distribution of fuels to the European hinterland, helping to ease the product glut in the ARA region. Nevertheless, inbound cargo flows from the Middle East, US, Russia and India will continue to test storage capacity”, said Gibson.
The shipbroker added that “furthermore, additional trading inefficiencies continue to support demand. Charterers have been observed importing distillate from the Far East into the Atlantic Basin via the Cape of Good Hope in order to benefit from a combination of contango in gasoil futures, the opportunity to delay delivery and greater discharge optionality. Should this trend continue, tonnage supply will artificially tighten offering support product tankers across the globe”, Gibson concluded.
Meanwhile, in the crude tanker market this week, in the Middle East, Gibson said that “a markedly different pace and feel to the VLCC market this week. Light early November Basrah programmes punctured Owners’ previous enthusiasm, and gave Charterers the breathing space to hold back, and re-group. In the interim, rates – on what little that was concluded – eased off to around ws 80 East, and under ws 50 to the West. Still very strong returns, but further downside threatens, despite a busier period to come. Suezmaxes also came off as the week progressed to ws 47.5 West and into the ws 80s again to the East, and more attention is quickly needed to stem the fall. Aframaxes picked up a little to 80,000 by ws 92.5 to Singapore, but it’s a tentative gain, and further gains are doubtful for the time being”, the shipbroker concluded.
Shipping activity at Port Qasim on February 11
KARACHI: Three ships namely, Glen Canyon, Al-Salam- II and TSM Pollux carrying Containers, Gas oil and Palm oil were arranged...
