Crude Oil Exports Hit Europe Aframax Rates; VLCCs Cut Clean Tankers Demand
US crude oil exports to the Mediterranean and West European countries have dragged down Aframax rates in these areas, seriously hurting the earnings of shipowners in what was earlier one of their most remunerative regions of deployment, a senior research analyst at EA Gibson Shipbrokers quoted as saying last Tuesday.
Many research models on US crude exports are based on VLCCs, but interestingly, trading patterns are pushing Aframaxes from the Caribbean region to Europe, resulting in excess supply at the destination and dragging down freight rates and earnings, Richard Matthews, head of research at EA Gibson Shipbrokers said at the Enmore Oil Tanker Shipping Summit in Beijing.
At this time of the year, Aframax owners in the Mediterranean can earn between $20,000-$30,000/day without even trying, and now, they are earning next to nothing, Matthews said. ESPO pipeline crude flows into China have also increased by over 200,000 b/d, threatening demand for tankers, he added. Most ESPO crude loadings from Russia’s Kozmino port take place in Aframaxes.
Singapore 380 CST Cash Differential Hit Three-Year High Mark
Singapore 380 CST high sulfur fuel oil cash differential rose to a premium of $4.94/mt at the Asian close on Friday, a three-year high amid tight supply stemming from low arbitrage inflow, S&P Global Platts data showed.
The last time the cash differential was higher was on June 22, 2015, at a premium of $5.43/mt, the data showed. The differential jumped $1.62/mt from Thursday. Singapore 380 CST HSFO was assessed at $431.38/mt Friday, up $5/mt day on day, Platts data showed.
At the same time, the Singapore 380 CST July/August spread was assessed at $6/mt Friday, the highest since May 29, 2015, when it was assessed at $13.25/mt, Platts data showed. Singapore’s commercial stocks of residues fell 4.6 percent week on week to 19.188 million barrels in the week ended June 20, IE Singapore data showed.
The stocks were last lower than that on May 23, when it was at 18.341 million barrels of stocks, the data showed. In addition to Saudi Arabia and Pakistan, Kuwait started buying HSFO for July delivery amid high demand for electricity. Kuwait Petroleum Corp bought two 80,000 mt cargoes of 380 CST HSFO with maximum 3.5 percent sulfur for delivery over July 1-2 and July 14-15 from Shell, trade sources said. Kuwait is typically an exporter of HSFO.
Kuwait’s First Ever Tender To Sell Super Light Crude
Kuwait Petroleum Corporation (KPC) has issued its first ever tender to sell a new grade of crude oil in Asia, three industry sources with knowledge of the matter said last Wednesday.
The tender offer follows last week’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) where the group, along with non-OPEC producers such as Russia, agreed to raise output from July by about 1 million barrels per day. The group’s de facto leader Saudi Arabia pledged a ‘measurable’ supply boost but gave no specific numbers. KPC offered 500,000 barrels of Kuwait Super Light Crude (KSLC) that will load on July 26 to 27 in a tender to close later on Wednesday, the sources said.
China-US Trade Spat To Hit VLCC Demand; Iran Purchases To Continue: Sinopec
Chinese oil refiners may not be able to import US crude at all if the government goes ahead and levies a 25 percent tariff on American energy products, and this will directly hurt the demand for VLCC tonnage, a senior Sinopec executive said last Tuesday.
However, the upcoming US sanctions have not had any impact on China’s crude purchases from Iran, which are moving in line with demand, the executive said. It is a policy decision to be taken by the government, but if the proposed tariff is implemented then the Chinese crude imports from the US will not be viable and we may have to stop, the executive said. Based on current crude prices, the proposed Chinese tariff will push up the cost of US crude oil delivered into China by as much as $18-$19/b, which will not make economic sense, the Beijing-based executive said.
Port Of Rotterdam Oil Spill Disrupts Chemicals Shipping
An oil spill at the port of Rotterdam is still preventing ships of all sizes entering and leaving the third petroleum harbor, last week.
Booms have been moved to the southern area of the terminal, suggesting activity could begin to resume in some areas in the coming week. The west section has been opened, according to a statement, but sources said shipping companies are unwilling to send in ships yet and ships are not being allowed to leave. They have opened a part of the harbour but the jetties are not cleaned and vessels have to be cleaned before they go out, said a port-based source. Ships come in at own risk so a lot of ship owners are saying they will wait until the jetties are cleaned, the sources quoted as saying.
Decline In China’s Coastal Coal Freight Continues
Freight rates for shipping coal from northern China’s Qinhuangdao port to the ports of Zhangjiagang, Shanghai and Guangzhou in the east and south continued to fall in the week to June 26, Qinhuangdao Port operator said.
The freight rate from Qinhuangdao to Zhangjiagang in eastern China’s Jiangsu province for 20,000-30,000 mt vessels stood at Yuan 37.50/mt ($5.72/mt) last Tuesday, down yuan 4.20/mt from June 12, said Qinhuangdao Port, which did not update coastal coal freight last week due to a public holiday.
The rate from Qinhuangdao to Shanghai for vessels with a capacity of 40,000-50,000 mt stood at Yuan 32.80/mt on June 26, down yuan 2.50/mt from June 12. The rate from Qinhuangdao to Guangzhou for 50,000-60,000 mt vessels stood at yuan 45.90/mt on June 26, down Yuan 4.50/mt from June 12.