A clear correlation between low product oil stocks and increased opportunities for tanker seaborne trade hasn’t been the case recently, as trade flows are in flux. In its latest weekly market report, shipbroker Gibson attempts to highlight the changing dynamics in the product tanker segment. It noted that “high product stocks, which have been a feature of the market in the wake of strong refining runs in recent years, can be a key barrier to international products trade. Therefore, Gibson closely monitors developments in refined product inventories to forecast tanker demand. However, in recent times, developments in onshore product inventories haven’t necessarily translated into the improved opportunities for product tankers. Is this a sign of changing dynamics or are other factors in play?”
According to Gibson, “looking at the latest data from the IEA on middle distillate and gasoline stocks, shore based inventories in OECD nations have returned close to historical averages. The latest data from November points to OECD gasoline and middle distillate stocks being just 10 million barrels above the five-year average, down from 100 million barrels above historic trends at the start of the year. This should therefore translate into increased products trading. However, when analysing stocks and trade into the key product hubs, lower stocks have not necessarily translated into higher seaborne imports”.
The London-based shipbroker added that “in the key distillate importing Antwerp-Rotterdam-Amsterdam (ARA) region, refined product stocks fell towards the end of 2017 to 1.917 million tonnes, down by 1.75 million tonnes from 2016’s peak. Historically, ARA has been a key outlet for US diesel cargoes, making stocks in the region an important barometer for product tanker demand in the Atlantic. However, even with a substantial fall in stocks, there has been limited impact on trade volumes from the US into the region. Whilst this has been partly driven by higher output in the region, a key factor behind this appears to be an insatiable appetite for US products in Latin America, which has often become a more attractive outlet for US exports”.
Meanwhile, “on the other side of the pond, gasoline stocks in the key US Atlantic Coast import hub currently stand at 63.219 million barrels, down 12 million barrels after peaking in early 2017 and the lowest seasonal level in 4 years. Has there been any material impact on gasoline trade from Europe to the US? No, volumes are down year on year, and would probably be lower had hurricane Harvey not disrupted US refining capacity last summer. Again, for European suppliers, other markets have proved more attractive, most notably West Africa (as covered in our 8 th December 2017 report) and at times, Eastern destinations. In the Far East, stocks remain elevated. Singapore inventories, which provide the most timely indication of regional supply and demand have built up substantially after dipping throughout the second and third quarters. Such stock levels have made trading arbitrage barrels of naphtha, particularly from the West, more challenging of late, whilst higher exports from China also compete with supplies from other regions”, said the shipbroker.
Of course, “the fundamental factors are set for a step change once again in just a few years’ time. Expanding refining capacity in the Middle East from 2019 onwards, and the change in the bunker specification will redefine global product balances, shifting trade flows (and tanker demand) accordingly. Yet in the short term, the key demand drivers emanate from developing nations with limited storage, insufficient refining capacity and incomplete data, making forecasting product tanker demand an interesting challenge” Gibson concluded.
Meanwhile, in the crude tanker market this week, Gibson said that “VLCCs spent a slow-paced week searching for a bottom to the market. The ‘blip’ of a couple of weeks ago can more certainly be marked as a dead cat bounce, and an ongoing swathe of availability will continue to act as a heavy drag anchor to any further hopes of re-inflation. Levels to the East dipped into the low ws 30’s for older units with down to ws 18 cape/cape paid to the USGulf. Suezmaxes found reasonable short haul attention, but that could never be enough to positively influence the wider market and with India on holiday on Friday, even that cargo flow dried up. Rates settled at down to 130,000mt by ws 65 to the East and to ws 27.5 to the West with little early change likely. Aframaxes bobbed along on modest interest and rates remained set at ws 92.5 to Singapore accordingly with similar levels anticipated over the next phase too”, the shipbroker concluded.
Source: Hellenic Shipping News.