Things are starting to perk up for tanker owners, both in the “dirty”, as well as in the “clean” tanker segment. In its latest weekly report, shipbroker Charles R. Weber reiterated this, by noting that “MR owners with tonnage in the Atlantic basin continue to reel from a substantial loss of demand in the USG market over the past two months since Hurricane Harvey hit the region, trimming refinery utilization rates and reducing product export demand. EIA data shows that PADD3 refinery utilization rates dropped in September to a low weekly average of 60.7%, which was the lowest level since late‐2008. The associated implications of such low utilization on domestic commercial inventory levels, combined with infrastructure issues at key terminals saw the pace of regional MR chartering demand drop to its lowest level since 2013 on both a weekly and four‐ week moving average basis. At the time of such low exports in 2013, refinery expansions – including Motiva’s substantial expansion of its Port Arthur, TX, plant had yet to turn the USG in the substantial product export region that it has since become”, said the shipbroker.
According to CR Weber, “indeed, the world fleet of MRs has grown by 29% since the start of 2013, making the impact of a substantial loss of USG product exports on rates and earnings plainly apparent. Fortunately, for MR owners, the factors gripping rates in recent weeks are far from structural‐and, in‐fact, may be constructive for rate progression in both the near‐ and intermediate‐terms. A key issue behind the fall in rates and earnings observed since 1Q16 has been that demand was adversely affective by an overbuilding of inventories during 2015 after oil prices collapsed and refining margins improved on lower crude input costs. Product demand levels, however, failed to grow at the same rate as refinery output, resulting in overbuild inventories, which by 2Q16 limited arbitrage trades and saw US product exports become increasingly short‐haul as destinations in Latin America absorbed the excess export supply. Two months of low utilization rates in the USG area, however, may well have done much to help rebalance inventories throughout the Atlantic basin, implying that as US product exports rebound, the MR trades they support could be more meaningful for rate progression”.
It added that “EIA data shows that PADD3 refinery utilization rose last week to 90.2% ‐ a gain of 6.5 percentage points from the previous week and the highest rate since prior to Hurricane Harvey in August. As refiners continue to progress past seasonal maintenance and operational issues from Harvey, the utilization rate should remain elevated and improve further during November, helping to support product export demand. Indeed, USG export demand observed this week was at a four‐month high. Meanwhile, MR demand in the Asia market has been particularly strong and a wide earnings premium there has kept units from seeking trades into the Atlantic basin, implying that as Atlantic basin trades continue to accelerate, availability levels may prove lower than has been observed since early during 2016”, CR Weber concluded.
Meanwhile, in the VLCC crude tanker market, CR Weber said that “rates in the VLCC market observed modest gains this week as strong demand countered negative undertones prevailing from last week’s rise in regional availability. The Middle East market observed 35 reported fixtures, representing a 75% w/w gain and the highest tally in nearly two months. The West Africa market surged to nine fixtures (including one for a part loading in South Africa) – a weekly gain of five fixtures and the most since early August. Demand in the Atlantic Americas was also stronger, rising by three fixtures w/w to a total of eight from all loading areas”, the shipbroker concluded.
Source: Hellenic Shipping News.