The disruption of clean petroleum product flows on the Colonial Pipeline spurred a flurry of spot clean tanker activity on both sides of the Atlantic Basin in the week started May 10, though upward momentum was stifled in Europe as requirements slowed due to growing expectations of the pipeline restoring supply by the end of the week, reports Platts.
Charterers looking to export barrels from the USGC after the closure of the Colonial Pipeline were caught in an already tightly-supplied Medium Range tanker market that stood at year-to-date rate highs from steady fixing the week ended May 7.
Inquiries for trans-Atlantic voyages were ample May 10 and May 11, with traded rates reported to have peaked at w165 after the Platts Market on Close assessment process May 10.
Platts assessed the 38,000 mt USGC-UK/Continent route at w165 May 11, increasing w20 or 14% day on day, a 12-month high. The assessed w165 or $28.5/mt level was the highest since May 6, 2020, when the route was assessed at $32.04/mt.
Rates Talked At 12-Month Highs
Short-haul voyages also saw rates talked at 12-month highs late May 11, with two charterers testing cargoes on the MR USGC-East Coast Mexico route and receiving offers at lump sum $750,000, according to shipowners. Platts assessed the USGC-East Coast Mexico route at lump sum $700,000 May 11, increasing or $125,000 or 25% day on day, the highest level observed since May 1, 2020, when the route settled at the same level.
Initially, freight markets in the UK-Continent heated up in tandem as sentiment built for a sharp increase in cargo inquiry in an already tightened market. Shipowners grew aggressive in first offers for available cargoes, leading to freight indications for UKC-US Atlantic Coast shipments, basis 37,000 mt, to jump to $21.12/mt on May 10, compare with $16.50/mt on May 7.
However, a combination of cargoes withdrawing, vessels failing subjects and a lack of fresh stem in the next day of trading brought home a sense of inflated expectations, in tandem with an overriding feeling that charterers were pushing speculative cargoes initially should the situation with the Pipeline be prolonged.
“It looks like speculation drove the market rife with higher rates but now this is dissipating, and we don’t have the fundamentals to sustain it,” a shipowner said.
Expected Pipeline Return
Shipping sources reported multiple spot trades for floating storage in the USGC May 10, with deals done over the weekend, though inquiry slowed toward the end of the market close May 11.
For a Suezmax-sized tanker carrying around 130,000 mt, Platts reported a floating storage deal May 10 at $25,000/day, and for a Long Range 1 tanker, rates were reported around $30,000/day. Closer to the Platts Americas MOC timing May 10, PBF booked an MR for 15- to 30-day USGC floating storage at a rate of $30,000/day, however the ship failed on subjects the morning of May 11, with PBF reported to have withdrawn the cargo.
Decreasing interest for floating storage coinciding with the Colonial’s end-of-week return projection and with USGC refineries reportedly slowing run rates since the pipeline’s closure.
Platts reported May 10 that Citgo had reduced rates at its 418,000 b/d Lake Charles, Louisiana, refinery as a response to the Colonial Pipeline’s closure. Media reports from May 11 said Motiva Enterprises had restarted two idled crude units at its 607,000 Port Arthur, Texas, refinery May 10. The units, with a total capacity of 275,000 b/d, were reportedly shut May 9, according to Reuters.
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Source: S&P Global