Medium Range (MR) oil products tanker rates in the north Atlantic soared on 3 March, as the US- Iran war has ratcheted up concerns over an extended hindrance to diesel and jet fuel shipments through the strait of Hormuz and turned buyers' attention to US Gulf diesel supplies — Europe's main alternative.
Freight rates on the US Gulf coast for MR tankers soared on 3 March, jumping to $72.39/t (WS365) for a Europe-bound voyage and to lump sum $2mn for a Caribbean-bound voyage — up by 30pc and 67pc respectively. Chevron and commodity trader ATMI both put MR tankers on subjects at these levels, which are the highest recorded.
The US Gulf is Europe's second largest diesel supplier after the Mideast Gulf. Diesel exports from the US Gulf to Europe totalled 203,000 b/d in February while those from Mideast Gulf totalled 409,000 b/d.
The surge in rates from the US Gulf to Europe also drove up the inverse UK Continent to the US Atlantic coast MR rate up, as it encouraged shipowners to reposition their vessels toward the US and — given that the two routes draw from the same pool of vessels in the Atlantic — drained available supply in northwest Europe.
The UK Continent to the US Atlantic coast rate surged by 46pc within two days and reached $31.46/t (WS190) on 3 March, from $21.53/t (WS130) just before the Mideast Gulf conflict started. That also drew the UK Continent to west Africa MR rate upwards to $52.86/t (WS275) on 3 March from $39.40/t (WS205) respectively.
Portugal's Sacor placed the Blue Butterfly on subjects from Sines to the US Atlantic coast at $31.46/t (WS190) on 3 March.
Tankers continue to steer clear from of the strait unable to transit because some large clubs of insurers have cancelled war risk cover, declining to offer cover at any premium. Iran claimed on 2 March that it has "closed" the strait of Hormuz connecting the Mideast Gulf and Gulf of Oman and intends to "burn" any ship that tries to pass through.
MR vessels will likely exit the European Handysize market as a result — in which they function as "swing tonnage", joining when the profits on their traditional routes are low and leaving as rates elsewhere rise — sharply reducing vessel supply in the Mediterranean and supporting rates there too.
