Pressure on Suezmax freight rates have led to a scramble to fix fuel oil cargoes on Suezmaxes to the East, according to fuel and shipping sources.
VLCC have dominated fixing activity in West Africa, particularly after the outage at the Forties pipeline in December, which has left about 30-40 Suezmax vessels floating off the coast of West Africa, awaiting instructions.
Additionally, the Baltic crude oil loading program has been relatively small so far this year and a lot of fuel oil has been offered on Suezmaxes this week because freight has been comparatively cheap against Aframaxes, which has hit the Aframax short-sea market, sources said.
However, as VLCC demand surged, freight rates for a lump-sum route from Rotterdam to Singapore have hit $3.2 million, the highest level seen since December 20, while the cost was heard at $1.7 million.
“VLCCs are expensive,” a ship broker said Wednesday. The Atina, basis 120,000 mt, is expected to load fuel oil in Rotterdam around February 4-5 for discharge in Singapore at a lump-sum rate of $1.7 million, shipping sources said Tuesday.
Another Suezmax was booked Wednesday to load fuel from Tallinn to Singapore for use in the bunker market.
A third Suezmaz was loaded in Russian Baltic port of Ust Luga, though this ship is being sent Lome, Togo, also for the bunker market.
Slack fuel oil demand in Northwest Europe has left companies shifting product away from Europe, even on an uneconomic arbitrage, sources said.
Fuel oil activity in January on Suezmaxes from the Mediterranean to the east was hefty, with much movement being done under the radar, due to a balanced to long Mediterranean market and luckluster local demand to outlet product open.
Mediterranean bunker demand was weak due to weather delays causing difficulties bunkering, however demand is expected to improve in February as the weather is likely to be more stable, sources said.
The 600,000 b/d Forties pipeline, owned by Ineos, suffered a hairline fracture in early December leading to a complete halt in crude flows through the line from December 11 and shutting-in of all the fields feeding in to the system.
The force majeure was lifted on December 30.
Forties accounts for about 40% of UK North Sea crude, and is one of the blends that make up the Dated Brent pricing benchmark, which is used as a reference for measuring the value of crude oil around the world.
Source: Hellenic Shipping News.