The Olmeca refinery in Dos Bocas, Mexico, was inaugurated in July 2022 by Mexico’s president Andres Obrador, and his successor, president-elect Claudia Sheinbaum. Two years later, it still produces only a fraction of its nameplate capacity of 340 kbd, despite numerous promises of it having reached full capacity over the years, reports Gibsons.
Imports Dropped
Kpler data shows cross-country clean flows averaging 40 kbd out of Dos Bocas between May and August, largely consisting of diesel. According to Pemex, the refinery processed 65 kbd in July, producing just 21 kbd of diesel and no gasoline. Some sources suggest the refinery is ramping up and currently running at 60% (around 200 kbd), whilst Pemex’ latest statement promised a full start-up by the 21st of August, with production split into 175 kbd of gasoline and 130 kbd of diesel. Yet, it is unclear whether these numbers closely reflect the reality on the ground.
On one hand, CPP imports dropped this year, averaging 670 kbd in the first 8 months of the year compared with 750 kbd last year. On the other hand, the numbers have been edging up in recent months, whilst lower CPP imports during the 1st five months of 2024 could be at least partially explained by increased refinery runs at other Mexican refineries over the period.
In terms of crude exports, average shipments for the year to date have also declined, reaching a low of 850 kbd compared with 1.1 mbd in 2023, which may suggest increased intake into Olmeca. However, one of the main drivers behind declining crude exports is continuous underinvestment in oil exploration and production, of which the latter is down to 2 mbd in 2024 from 2.1 mbd in 2023. The IEA predicts that production will further decrease to just 1.46 mbd in 2030, another 27% drop in six years.
Crude Oil
East
Overall it was another positive week for VLCC Owners in the East with rates climbing steadily as Charterers moved to cover the remaining September stems. Tonnage availability has tightened, and Charterers are meeting more resistance than expected. It will be interesting to see how quickly we see the October program move, but one negative could be the upcoming holidays in the East next week which could put a temporary hold on the latest upturn. However, the fundamentals suggest we should see further firming once activity returns to normal levels. In today’s market we are calling Ag/China over WS53 and 280kt AG/USG fetches WS32 via C/C.
The AG list has tightened very quickly under the radar, and Suezmax Owners ambitions for West runs are likely to push up next week. TD23 we assess at 140,000mt x WS55 via C/C but it won’t take too much next week to see improvement here. For East runs, the market is still firm and for modern approved tonnage Charterers should expect to pay 130,000mt x WS110.
With APPEC week in full flow, Aframaxes in the East struggled to gain any momentum as activity remained limited. The list has replenished with a diverse range of candidates available to Charterers for any given direction. As Q4 is just around the corner, Owners will be hoping for fresh inquiries soon as they look to the firming Suezmaxes and VLCCs for inspiration. The week ends with AG/East at 80,000mt x WS145 with sentiment soft.
West Africa
VLCC freight rates continued to improve in WAF as activity levels showed some recovery from the recent lull, especially going east. Positions have tightened for natural fixing dates in October and the pickup in AG and other parts of the Atlantic has led to stronger sentiment amongst Owners, with expectations being raised in anticipation of a stronger market in Q4. Today we expect 260kt WAF/China to fix in the region of WS58 level.
As we finish the week, Suezmax markets in West Africa are firm with a good activity level and a real dent taken out of the early position on the list. TD20 we approximate should be 130,000mt x WS80, and rates are steady around this mark with ample tonnage to cover the current demand.
Mediterranean
TD6 rates remain steady around 135,000mt x WS80 with a few prompt vessels to keep the pressure on Owners. With CPC largely if not completely covered up until end month, ships are beginning to ballast towards Malta. Rates to head East remain relatively stable at $4.6m for Libya/Ningbo via C/C, though the number of ships keen on this run have thinned out.
As the week started Med Aframaxes saw increases in market levels with the benchmark Ceyhan pushing up to WS120 having been aided in their quest by shorter Libya runs being concluded at WS132.5 and WS140. This was driven by a combination of positive sentiment and a tonnage list remaining tight in early availability. From mid-week onwards, however, this momentum slowed and all but dried up towards the end of the week. Charterers’ senses are now alert and some of these recent gains could be undone soon due to news circulating that talks in Libya over a resolution to the recent cut in output have been ineffective. This coupled with what little is evident in the market means negative tests could be in store come Monday.
US Gulf/Latin America
Another mixed bag here as VLCC rates showed an uptick but it was marginal considering the number of cargoes being worked from the USG area. Charterers looking at covering mid-October dates found an ample supply of tonnage, and were, therefore, able to dampen Owners’ hopes of a return to the generous levels enjoyed earlier in the year. On the other hand, Brazilian exports witnessed a very active week, and rates showed a similar pattern to the upturn in adjacent zones. Today we expect a USG/China cargo to pay in the region of $7.5m and a Brazil/China run is around WS57 level.
The rest of local Americas was a bit all over the place this week. Small ships remained relatively inactive, as some private deals and lightering business took place while the tonnage lists built. Owners maintain a floor of about WS145 for Caribs on Panamaxes and WS117.5 for Aframaxes USG/TA. Suezmaxes were pressured to rise on the back of WAF but activity was a little lackluster in terms of deals.
North Sea
Aframaxes in the North Sea market have danced their usual merry dance with a light tonnage list balanced against an even lighter cargo list. Some ballasters to the States have aided Owners in keeping the rates from going any lower in the main, but no fireworks have been seen and the prevailing sentiment is one of disappointment. Cross North Sea remains at WS115 in most cases, with some premiums paid for more expensive ports and discounts of 5 points seen for vessels fixed straight out of dock. As we look forward there is not much reason to expect change unless we have a surprise from the States.
Dirty Products
Handy
Handies in the North got off to a sluggish start this week. A 30 x WS222.5 for an xUKC run reported on Tuesday seemed to turn the heads of Charterers as a flurry of cargoes soon hit the market. This clipped away units and left the list in much healthier shape for Owners with few naturally positioned units available. Given the lengthy looking list in the Med, Owners positioned wMed are willing to ballast to meet demand and bring some reprieve to the list.
It’s a different story in the Med. Despite what looked like a promising start to the week, enquiry soon faded and remained muted for the remainder of the week. What activity we did see was covered off-market with Charterers and Owners alike opting to keep details buried. Looking ahead to next week, the tonnage list is lengthy and we expect to see WS200 tested and unless enquiry picks up, tested down further.
MR
It’s been another slow week for Owner’s in the Med as basis full stem with part cargoes once again the norm. Availability in the North has diminished leaving the list tight and few options available with levels around the WS175 mark for a vanilla xUKC. In the Med, the market still awaits a well-publicised test at full stem as enquiry remains elusive and details kept off-market. Tonnage is relatively thin in the Med given the overall length of the list although this could soon change with replenishment on the way – we assess levels here at the WS155-160 mark.
Panamax
Inquiry continues to elude the market with Owners choosing to ballast to the USG rather than stay idle and wait for cargoes that rarely surface leaving tonnage thin on the ground. Over in the Caribs/USG, storm Francine failed to cause too much disruption leaving itineraries intact and little opportunity to take advantage leaving sentiment soft.
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Source: Gibsons
