Europe to US MRs up on Colonial closure

Europe to US MR freight rates pushed higher today, on the back of the cyberattack that forced the closure of the US Colonial Pipeline over the weekend.

Norwegian refiner Equinor put the Nord Majestic on subjects from Mongstad to the US Atlantic coast at WS160, which equated to a UK Continent to US Atlantic coast rate of WS160 ($20.62/t) as a WS5 premium for the Norwegian load port offset a WS5 discount because the ship recently carried palm oil. This was WS35 ($4.51/t) higher than the rate of WS125 ($16.11/t) on 7 May.

At least one charterer received an offer for a UK Continent to US Atlantic coast cargo at WS165 ($21.27/t), and some shipowners reportedly targeted up to WS180 ($23.20/t). But many charterers were still hesitant to agree to bookings until the timetable for the restoration of the Colonial pipeline is more clear.

A closure at the Colonial Pipeline in August 2017 — when Hurricane Harvey hit the US Gulf coast — caused the UK Continent to US Atlantic coast rate to jump by $15.89/t in the space of a week. The rate climbed to $27.40/t on 1 September 2017, up from $11.51/t on 25 August, before sliding to $10.96/t by 15 September once the pipeline reopened.

The scale of the current closure's impact on the freight market will depend on how quickly service is restored. So far the company has restored operations at terminals and smaller branch lines moving fuels to inland markets. But the major trunk lines moving fuels from the largest US refining hub to the Atlantic coast remain shut.

MR freight rates had already been inflated by a buoyant Europe to US MR market last week as US demand for European gasoline surged on the back of rising prices in the US Gulf, which encouraged the Atlantic coast blenders to switch to European imports. This additional demand tightened vessel supply and pushed the rate up by WS15 ($1.93/t) on a net basis last week.

The arbitrage window for European gasoline into the US has been kept closed recently by the rising cost for US blenders to comply with the US Renewable Fuel Standards (RFS) but opened briefly last week leading to a spate of bookings.

By John Ollett