Products markets get a boost from ‘Harvey’

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A number of European-sourced gasoline cargoes, which were initially bound for West Africa and within Europe, have now changed destination to the US in the wake of Hurricane ‘Harvey’ , according to Colin Halling, Genscape’s senior oil analyst

 

Writing a blog on Thursday, he said that thus far, Genscape had seen around 111,000 tonnes of European gasoline diverted to the US.

Product tankers rates to move gasoline from Europe to North America have increased sharply since the start of this week. As gasoline prices in the US shot up a total of 20 cents per gallon from 25^th August, to 30^th August, there was increasing interest to ship petroleum products transatlantic from Europe. This sudden doubling in freight costs broke a long recent spell of comparatively cheap transatlantic freight rates.

Transatlantic clean freight rates had previously been stable in a low range of around  WS105-115 throughout most of August prior to’Harvey’, which has caused major disruption to refining operations in the US Gulf, home to around half of the country’s total refining capacity.

As a result, US gasoline prices rose sharply, amid reports of disruption to the Colonial pipeline system, which moves products from the US Gulf to the Northeast of the country.

Some notably strong tanker fixtures already concluded this week included Statoil fixing the ‘Green Planet’ to move around 37,000 tonnes of gasoline to the US East Coast from its refinery in Mongstad, Norway, at WS215, and Repsol, which fixed the ‘Challenge Pearl’ at the same rate out of Northern Spain. Both will load on around 5^th to 10^th September laycan dates.

Many of new shipments are thought to be on subjects, Halling said and will have a range of discharge destination options throughout both North and South America. Port-specific destinations are generally declared on departure, but often change en route.

Thus far, some 918,000 tonnes of gasoline had been chartered to move transatlantic out of Europe for loading during the end of this week and next. Around 185,000 tonnes is currently loading in European ports (as of 30^th August) and is expected to go transatlantic - based on fixture information. Another 310,845 tonnes of gasoline had already left Europe this week to destinations, including New York and Tuxpan.

By comparison, recent weekly totals for transatlantic gasoline exports to North and South America have recently been around plus or minus 600,000 tonnes, although the level did drop as low as 468,000 tonnes in July.

By mid-week, Bloomberg had recorded 20 tanker fixtures to load European fuel for the US. The fixtures are about double the average for August. Shipbrokers said cargo flows to New York will be the highest since November, when a pipeline blast curbed shipments from the Gulf of Mexico.

‘Harvey’ has knocked out almost a quarter of US refining capacity, of which more than half is in the Gulf of Mexico region. As a result, this has lowered domestic crude prices, since fewer plants are able to process it, while simultaneously restricting the supplies of fuel, such as gasoline and diesel.

“It will take several weeks before the whole refining capacity is restored,” said Ehsan Ul-Haq, a London-based director of crude oil and refined products at Resource Economist talking with Bloomberg. “As a result, increased gasoline flows from Europe to the US will continue at least for three to four weeks.”

Shipbrokers anticipated 30 cargoes being booked to load over the next two weeks, Bloomberg said.

Gasoil markets also firmed, as the region depends on Gulf of Mexico refineries for imports. In a market that was already showing signs of tighter supply thanks to major disruption at Pernis in Rotterdam, Europe’s largest refinery, the severe restriction of flows from the US is also providing support. Contracts for October delivery of gasoil are now about $6 per tonne more expensive than those for November, indicating concerns over a scarcity of supply.

Meanwhile, Platts reported on Wednesday, that the hurricane’s aftermath had increased US demand for gasoline and gasoil from Asia. The increase in activity could be seen across all vessel types from LR2s to MRs.

Traders were keeping their options open to deliver jet fuel or gasoline cargoes into the US or South America and are already making changes to their fixtures, said one source.

Additional demand may see gasoil cargoes move from India and the Middle East to Europe and gasoline and jet fuel cargoes to the US. However, uncertainty remains on the extent to which this new or incremental demand can be met from the alternative origins and is likely to push up prices of refined products, sources told the newswire.

BP has chartered an MR for $1.25 mill for 8^th September loading Singapore for US West Coast, sources said. There is also an option to take the cargo to the US Gulf Coast by paying an additional $250,000, they said. The rate is significantly higher than the last done levels, they added.