- West Africa replenishing depleted gasoline storage
- Trans-Atlantic rates could be pressured lower
A Platts news source says that LR tankers capitalize on spot WAF gasoline demand leaving smaller ships reeling.
Weakening Long Range tankers west of Suez markets
Traders have taken advantage of weakening Long Range tankers west of Suez markets to push a large volume of gasoline to West Africa in a short time, with the region heard witnessing low volumes of offshore storage in Lome, Togo.
Since Jan. 14, four LR2s have been heard placed on subjects for Amsterdam-Rotterdam-Antwerp to West Africa shipment carrying 90,000 mt of gasoline, while three LR1s have been heard on subjects for the same shipment carrying 60,000 mt. This totals 540,000 mt of gasoline shipment scheduled to load between Jan. 20-Feb. 1.
LRs amid quick turnaround in spot demand
Charterers have targeted LRs amid quick turnaround in spot demand leading to higher ship requirements due to more attractive dollar per metric ton rates.
LR markets have been under pressure since the start of 2022 due to poor interest in Asia for naphtha shipments, a weakening Persian Gulf market from less distillates shipments to the UK-Continent and more ballasters repositioning themselves in western markets.
With West Africa markets lacking gasoline intake for the latter part of the fourth quarter in 2021, buyers have pushed for spot inquiry as storage depletes in bulk as a result.
Supply tight in West Africa
The West African gasoline market saw a particularly high demand festive season. However, Northwest European exports to the region did not rise in step with demand due to supply constraints as natural gas prices in Europe rose to multiyear highs, necessitating run cuts at refineries.
Tighter supply caused depletion of gasoline inventories in the offshore Lome storage area, which serves as a storage facility for much of West Africa. A West Africa-based trader estimated that storage in the region fell by about 25% over December.
“When Nigerian storage gets below a certain target, it triggers a lot of buying activity,” a West Africa-based trader said, adding “Nigeria is absorbing more barrels from the offshore Lome market, so we’re seeing more demand for barrels to replenish that storage.”
Robust West African demand for Northwest European exports has caused a rally in gasoline prices. Platts Gasoline FOB NWE West Africa Cargo was assessed at $823.75/mt Jan. 18, the highest value since Nov. 2, according to S&P Global Platts data.
Smaller ships under pressure
The sharp rush for LRs in WAF markets could play to the advantage of charterers searching for gasoline shipments in other markets, namely trans-Atlantic voyages for gasoline requirements.
The fixtures have likely cut alternative options for Medium Range tanker owners to exploit, leaving a high volume of tonnage repositioning in the UK-Continent and Mediterranean markets and giving charterers an opportunity to pressure rates to come lower.
“This hasn’t been good for our markets, we already don’t have a clear arbitrage opportunity for gasoline on trans-Atlantic markets so we’ll likely see rates soften unless cargoes appear,” a shipowner said.
Gasoline demand in the US Atlantic Coast was down in the aftermath of a storm that impacted the southeast of the region. Interest in sending volumes on trans-Atlantic route has suffered as the US built its gasoline stocks following successive weeks of drawdown.
Recent large builds in gasoline stocks saw US gasoline inventories rise by 18.1 million barrels between Dec. 24 and Jan. 7 to reach the highest inventory level since June 2021 at 240.75 million barrels, according to US Energy Information Administration data.
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Source: Platts
