Shipowners find silver lining in Atlantic crude moves
Strong shipments of Atlantic basin crude to Asia, including exports from the US, have mitigated the impact of a rapidly growing crude tanker fleet on freight rates, crude tanker owners said this week at the Capital Link International Shipping Forum in New York City.
"[Tanker] demand remains surprisingly resilient. We have been shipping a lot from the US Gulf coast to China", said Paddy Rodgers, chief executive of Euronav, one of the largest dirty tanker operators.
North American crude producers have successfully bitten into Opec's market share in Asia, as the organization's adherence to production cuts announced in November has made US and Canadian crude more attractive.
When Opec pulled back its production, it spurred demand from the Atlantic basin, said Robert Burke, chief executive of Ridgebury Tankers. "We are seeing a lot more oil out of the US", said Burke.
US crude exports have amounted to 750,000 b/d this year through 17 March, according to the US Energy Information Administration (EIA). About 40pc of the total has landed in Asia, estimated MJLF tanker analyst Court Smith, far exceeding the proportion last year.
Only 11pc of the 520,000 b/d that the US exported in 2016 went to Asian countries, consisting of China, South Korea, Singapore, Japan, and Taiwan.
US crude to Asia travels primarily on Suezmax and VLCC tonnage. Draft restrictions at US Gulf coast ports preclude these larger tankers from taking full cargoes directly from port terminals, so the ships must be filled — or topped off — via ship-to-ship transfers in the Gulf of Mexico. "We are seeing a lot of reverse lighterings", said Lois Zabrocky, the chief executive of International Seaways.
While longer voyages from the Atlantic basin to Asia are displacing some of the shorter ones originating in the Middle East, adding tonne-miles to the tanker market, the flood of new dirty tanker tonnage onto the market has worried shipowners and already pushed freight costs down.
"The orderbook is certainly problematic", said Burke. Strong tanker rates from late 2014 and through 2015 triggered a wave of tanker orders at shipyards. The new deliveries have already begun to weigh on rates, helping to drop the year-to-date average Caribbean-Singapore VLCC rate by 26pc year-on-year to $4.6mn lumpsum. It takes a shipyard roughly two years to construct a supertanker.
The rate decline for the Suezmax segment along the same route has been more modest in that period of time, falling by 17pc year-on-year to $2.9mn. Many oil companies and energy traders opt for Suezmax tonnage over VLCCs to move their US crude to Asia, as the smaller size the 1mn bl tankers make them logistically easier to charter. This additional demand for Suezmax tonnage in the US Gulf coast helps account for the more moderate rate decline compared to VLCCs.
Crude tanker deliveries will continue to hit the water at an elevated pace. Tankers representing about 11pc of the current global VLCC fleet remain on order and the Suezmax figure stands at 18pc, according to shipbroker Charles Weber.
Related news posts
Houston area refiners weather hurricane-force winds
Houston area refiners weather hurricane-force winds
Houston, 17 May (Argus) — Over 2mn b/d of US refining capacity faced destructive winds Thursday evening as a major storm blew through Houston, Texas, but the damage reported so far has been minimal. Wind speeds of up to 78 Mph were recorded in northeast Houston and the Houston Ship Channel — home to five refineries with a combined 1.5mn b/d of capacity — faced winds up to 74 Mph, according to the National Weather Service . Further South in Galveston Bay, where Valero and Marathon Petroleum refineries total 818,000 b/d of capacity, max wind speeds of 51 Mph were recorded. Chevron's 112,000 b/d Pasadena refinery on the Ship Channel just east of downtown Houston sustained minor damage during the storm and continues to supply customers, the company said. ExxonMobil's 564,000 b/d Baytown refinery on the Ship Channel and 369,000 b/d Beaumont, Texas, refinery further east faced no significant impact from the storm and the company continues to supply customers, a spokesperson told Argus . Neither Phillips 66's 265,000 b/d Sweeny refinery southwest of Houston nor its 264,000 b/d Lake Charles refinery 140 miles east in Louisiana were affected by the storm, a spokesperson said. There was no damage at Motiva's 626,000 b/d Port Arthur, Texas, refinery according to the company. Marathon Petroleum declined to comment on operations at its 593,000 b/d Galveston Bay refinery. Valero, LyondellBasell, Pemex, Total, Calcasieu and Citgo did not immediately respond to requests for comment on operations at their refineries in the Houston area, Port Arthur and Lake Charles. A roughly eight-mile portion of the Houston Ship Channel from the Sidney Sherman Bridge to Greens Bayou closed from 9pm ET 16 May to 1am ET today when two ships brokeaway from their moorings, and officials looked in a potential fuel oil spill, according to the US Coast Guard. The portion that closed provides access to Valero's 215,000 b/d Houston refinery, LyondellBasell's 264,000 b/d Houston refinery and Chevron's Pasadena refinery. By Nathan Risser Houston area refineries Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Houston Ship Channel open after storms
Houston Ship Channel open after storms
Houston, 17 May (Argus) — The Houston Ship Channel reopened to all traffic around 1am ET Friday after strong storms closed a portion of the waterway late Thursday, according to the US Coast Guard. A roughly eight-mile portion of the Houston Ship Channel from the Sidney Sherman Bridge to Greens Bayou closed from 9pm ET to 1am ET due to two ship breakaways and a probe into a potential fuel oil spill, the Coast Guard said. That span of the channel offers access to Chevron's 112,000 b/d Pasadena refinery, Valero's 215,000 b/d Houston refinery and LyondellBasell's 264,000 b/d Houston refinery, as well as Targa's Galena Park LPG marine terminal and Kinder Morgan's refined product terminal in Galena Park. A storm brought winds up to 74mph to the Houston area on Thursday night, according to the US National Weather Service. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India’s Gail signs 14-year time charter for LNG carrier
India’s Gail signs 14-year time charter for LNG carrier
Mumbai, 17 May (Argus) — India's state-controlled gas distributor Gail has signed a 14-year time charter agreement with US-based LNG shipping firm CoolCo for an LNG carrier, the former said on 16 May. The time charter for the LNG carrier will start operating from early 2025 as it is currently under construction. Gail is likely to receive the carrier during October-December in the Gulf of Mexico, CoolCo said. The charter will be the fifth LNG carrier in Gail's vessels that are intended to secure long-term supply of LNG in India. Gail will have an option to extend the charter by two additional years beyond its contracted 14-year period. The LNG carrier will likely be used to ship LNG volumes from the US, Russia, and from its recent contracts with Abu Dhabi's state-owned Adnoc and trading firm Vitol , a company official told Argus . (See table) "Long-term cargoes are there and there are a few lifts from the spot markets as well," the source added. "It is how the consumption pattern of the country is now shaping more towards LNG since domestic volumes are constrained." The firm also planned to add an LNG tanker to ship cargoes from the US, Argus exclusively reported in February. Gail expects India's gas demand to rise and has been looking to secure more term deals . Gail is seeking an additional 7mn-8mn t/yr of LNG for its portfolio with a further 1mn-2mn t/yr, the firm said in January. This reiterates targets set in August last year . Gail's portfolio growth aligns with the government's plan to increase the share of gas in its primary energy mix to 15pc by 2030 from around 6pc in 2022. By Rituparna Ghosh Gail contracts mn t/yr Supplier/terminal Volume Fob/des Dates Sabine Pass 3.5 fob 2018-38 Cove Point 2.3 fob 2018-38 SEFE 2.5 des 2018-41 Vitol 1.0 des 2026-36 Adnoc 0.5 des 2026-36 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Texas barge collision shuts GIWW section: Correction
Texas barge collision shuts GIWW section: Correction
Corrects volume of oil carried by barge in fourth paragraph. Houston, 16 May (Argus) — Authorities closed a six-mile section of the Gulf Intracoastal Waterway (GIWW) near Galveston, Texas, because of an oil spill caused by a barge collision with the Pelican Island causeway bridge. The section between mile markers 351.5 and 357.5 along the waterway closed, according to the US Coast Guard. A barge broke away from the Philip George tugboat and hit the bridge between Pelican Island and Galveston around 11am ET today. Concrete from the bridge fell onto the barge and triggered an oil leak. The barge can hold up to 30,000 bl oil, but it was unknown how full the barge was before the crash, Galveston County county judge Mark Henry said. It was unclear when the waterway would reopen. An environmental cleanup crew was on the scene along with the US Coast Guard and Texas Department of Transportation to assess the damage. Multiple state agencies have debated the replacement of the 64-year-old bridge for several years, Henry said. The rail line alongside the bridge collapsed. Marine traffic does not pass under the bridge. By Meghan Yoyotte Intracoastal Waterway at Galveston Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more