A number of very large crude carriers (VLCCs) carrying diesel from the Mideast Gulf to Europe may discharge part of their cargoes in west Africa, according to market participants.
Four VLCCs are heading on the route around the Cape of Good Hope, with the charterers taking advantage of a seasonal slide in VLCC rates and shouldering the cost of cleaning the tankers so they can carry diesel. Between them the four could be carrying more than 1mn t of diesel, and the arrival of such a large quantity would put pressure on prices in Europe.
But a European diesel trader said the Plata Glory will undertake a ship-to-ship (STS) operation off the coast of west Africa. It is loaded with 270,000t of gasoil of unspecified sulphur content and is scheduled to arrive at the northern French port of Le Havre on 31 July, according to Kpler. Another European diesel trader said the Plata Glory will be joined in west Africa by the KHK Empress. The latter is scheduled to deliver 280,000t of 10ppm ultra-low sulphur diesel and clean products to a destination west of Suez on 15 August, Kpler data show. The tanker is off the coast of the UAE at the time of writing.
VLCCs can hold different oil product grades in separate sections, facilitating the transport of 10ppm sulphur diesel and higher sulphur gasoil grades. This could allow a VLCC to discharge high sulphur gasoil to the west African market and ultra-low sulphur diesel to a European buyer. The west African products market is typically supplied with large tankers that discharge via STS offshore Lome, Togo, for onward delivery on smaller tankers to Nigeria, Togo and Ghana.
The arrival of high sulphur gasoil would temporarily pressure prices in the offshore Lome market, a west Africa-focussed trader said. The 10ppm diesel and gasoil delivered to Europe would probably pressure diesel values most significantly in the Mediterranean market, where tight supply pushed west Mediterranean diesel cargoes to a premium of $7.25/t to the northwest European equivalent on 4 July, a 12-month high. The VLCCs scheduled stop offs in west Africa suggest there may be less gasoil arriving in Europe, however.
The prospect of gasoil arrivals offshore Lome comes as Nigeria, the region's largest importer, appears to be meeting much of its needs from its 650,000 b/d Dangote refinery, which is also exporting into the west African market.
Nigeria has pushed down the sulphur content of its imported diesel and gasoil to as low as 18.2ppm in June, its downstream regulator said. The arrival of high sulphur gasoil on the VLCCs would probably need to find buyers in countries with higher tolerance for sulphur content in imported oil products, such as Togo.
