Crude Summit: Product trade growth tops crude: Motiva

Global shipments of refined products is growing faster than crude as US refiners balance flattening domestic demand and shifting fuel specifications by tapping export markets, according to Motiva.

An improving ability to load larger and larger vessels with clean products has driven down shipping costs and sparked a rapidly changing Atlantic basin arbitrage, Motiva executive vice president of supply, trading and logistics Todd Fredin said today at the Argus Crude Summit in Houston, Texas.

"Global crude trade has probably stayed pretty steady. Global product trade has shot way up," Fredin said.

Rising volatility around clean freight rates has meant that "who has the competitive advantage literally changes almost from day to day," he said.

US refiners expecting flattening domestic product demand have stretched their supply chains into Latin America and other growing markets overseas. Export markets also provide homes for gasoline or other clean fuels that no longer meet stringent US sulfur requirements.

Products trade lacks a traditional hedging market to offset the risk associated with the more volatile freight costs, leading to an increased interest in charters, Fredin said. Destination ports will need upgrades to take advantage of the larger vessels loading fuels, he added. But the changes have made trade between the US, Europe and Latin America more fluid, and much more sensitive to available waterborne freight rates.

"I do not know if we are going to be long or short, in particular, on a week-to-week basis," Fredin said. "If your vessels move out of the Gulf coast and there is only one left, I can tell you what is going to happen to that rate if two of you need it."

By Elliott Blackburn