Crude tankers may benefit from US refinery maintenance

The crude tanker market in the US Gulf coast may receive a boost from a heavier-than-normal spring maintenance season at refineries, with more crude oil likely available for export.

Significant turnaround work is scheduled for the first quarter at refineries with a combined crude throughput capacity of 1.85mn b/d, following above-average run rates in 2022 amid high margins spurred in part by the war in Ukraine. About half of that capacity is on the US Gulf coast.

The planned maintenance comes as China, the world's largest crude importer, reopens from strict Covid-19 lockdowns, adding to the global appetite for US crude. The combination could mean increased demand for crude tankers along the coast of Texas and Louisiana.

The forward freight agreement (FFA) rate for transatlantic Aframax voyages from the US Gulf coast is $5.23/bl in January and $5.67/bl in February, indicating the futures market expects the rate to climb from $5.36/bl on the spot market on 23 January. The FFA rate for very large crude carriers (VLCCs) on US-China voyages over the same period is $3.98/bl and $3.88/bl, respectively, in range with $3.99/bl on the spot market on 23 January.

The maintenance also comes against the backdrop of rising US crude production, potentially adding to any excess crude supply in the US Gulf coast. US crude production was about 12.13mn b/d in the two-month period ending 13 January, compared with 11.7mn b/d in the same period a year earlier, according to Energy Information Administration (EIA) data.

With China reopening, VLCCs, which carry about 2mn bl of crude, will still compete with Suezmaxes (about 1mn bl) and Aframaxes (about 700,000 bl) for exports.

"In theory, how hard the VLCC scrounging goes will depend on if more sweet or sour is added to exports," a shipbroker said. "Sour increases the scrounge factor as that is more likely to go to Asia."

ExxonMobil's 250,000 b/d expansion at its refinery in Beaumont, Texas, which is expected to start up in February, will also compete for WTI barrels, with capacity there set to top 600,000 b/d, likely crimping US crude exports.

By Tray Swanson