Medium Range (MR) tanker freight rates for refined oil product shipments from the US Gulf coast are nearing six-month lows on ample vessel supply and tepid demand from geopolitical turmoil and weather disruptions.
Commodity trader Sol on 4 November put the Aquila L MR tanker on subjects for a US Gulf coast-Pozos, Colombia, voyage loading from 11-12 November at $490,000 lumpsum, representing the lowest rate on that route since 20 May and a 62pc drop from the two-month high hit on 16 October at $1.3mn. Hurricane Melissa sprang up shortly after 16 October, contributing to a significant drop in Caribbean demand in the spot market and wreaking havoc in Jamaica and Cuba later that month.
The drop in Caribbean buyers, one of the major demand drivers for the US Gulf coast spot market, alongside a high number of vessels ballasting into the region from west Africa, Europe and even some transiting the Panama Canal from the Pacific basin boosted the region's tonnage pool by 30 October. There were 19 MR tankers available to load within a five-day window on that day, according to a shipbroker, the highest in that window since 19 May when rates were nearing multi-year lows partly on tariff and regulatory uncertainties.
Time-charter equivalent (TCE) rates represent potential returns on voyages for shipowners, and the US Gulf coast-Pozos voyage TCE rate ballooned from $11,766/d on 17 September to $50,670/d by 16 October. Meanwhile, the Rotterdam-New York voyage TCE rate dropped from $8,314/d to $6,087/d in that same period, maintaining the US Gulf coast spot market as the most alluring destination for MR tanker operators in the Atlantic basin compared to Europe and triggering the steady build-up of MR tonnage around Houston.
Long-haul rates resisting downward pressure
Rates for west coast Americas-bound voyages loading in the US Gulf coast may be shrugging off downward pressure on reduced competition for these voyages after rates pushed down near range lows on 3 November.
Shipowners could be counting on an influx of east coast Mexico and Caribbean near-term demand in the wake of Hurricane Melissa that could chew through the prompt tonnage that had built up in recent weeks. Vessel operators who secure the short-duration voyages to these regions in the coming days would be well positioned to reenter the US Gulf coast spot market during that potential rebound, and some shipowners might be leveraging this to secure an uptick in voyage rates for longer Panama Canal-transiting routes.
Chevron put the Pintail Pacific MR tanker on subjects for a US Gulf coast-west coast Central America voyage from 11-12 November at $1.55mn, a $100,000 increase from the rate's assessment on 3 November. Meanwhile, Mexican state-owned refiner Pemex's trading arm PMI put the Vukovar MR tanker on subjects for a US Gulf coast-west coast Mexico voyage at $1.99mn, a $90,000 increase from that rate's assessment on 3 November.
Large tanker rates hit highs on Brazil, Asia influx
Rising Brazilian and Asia-Pacific demand not only buoyed long range 1 (LR1) tanker loadings in the US Gulf coast to their highest in October since US sanctions on Venezuela barred that country from imports in May, but also boosted previously rare LR2 loadings to likely all-time highs.
Brazilian diesel demand shifted to the US Gulf coast because of Russian refinery issues beginning in September, which helped to boost LR1 loadings in October to their highest since May alongside a jump in Japanese naphtha demand, according to Vortexa data.
Rates for US Gulf coast-Europe and US Gulf coast-north Brazil LR1 voyages hit 18-month highs on 31 October at $38.22/t and $33.80/t, respectively, rising by around 75pc since 22 May compared to much more volatile, and overall declining, MR tanker rates in that same period.
Venezuelan imports carried by LR1s in May made up the plurality of the US Gulf coast spot market for that vessel segment at 40.6pc of all shipments, according to Vortexa, representing 92,800 b/d of demand. The removal of this demand driver had pushed Argus-assessed LR1 rates for Europe and east coast South America-bound voyages to their lowest levels in two years by the end of that month.
Meanwhile, previously rare LR2 tanker demand in the US Gulf coast hit its highest level in October stretching back through 2016, according to Vortexa. Brazilian buyers loaded 74,500 b/d on that vessel segment in October alongside 51,500 b/d to Europe and 48,000 b/d to South Korea.
The uptick in long range tanker demand overall is eating into the typically MR tanker-dominated US Gulf coast spot market and contributing to the persistently high vessel supply within that segment. US president Donald Trump's October tour of Asia-Pacific countries like Japan and South Korea could contribute to internal pressure within those countries to expand US business ties, pushing additional buyers toward US Gulf coast LR1 and LR2 loadings of naphtha over closer Mideast Gulf suppliers.
