- Trafigura is increasing the number of its VLCCs and Suezmaxes that can transport refined fuels.
- Weaker oil demand and OPEC production cuts are driving tanker conversions.
- Attacks in the Red Sea are boosting charter rates for smaller ships, extending routes.
Yahoo Finance reports that around 12% of Trafigura’s Very Large Crude Carriers (VLCCs) and 20% of its Suezmaxes have been converted to carry refined fuels like gasoline and diesel, in addition to crude oil, said Andrea Olivi, the company’s global head of wet freight.
“From what we see in the market today, I would expect this number to potentially increase,” Olivi added.
Conversion Driven by Low Crude Tanker Rates
The decision to convert these ships came after a drop in crude-oil tanker rates, driven by lower demand for oil from China.
Additionally, production cuts from the Organization of the Petroleum Exporting Countries (OPEC) have resulted in less oil needing transportation, Olivi explained.
Rising Demand for Fuel Transport
Attacks on merchant vessels by Houthi militants in the Red Sea have caused ships to reroute around Africa to reach Europe from Asia. This longer journey has increased charter rates for smaller ships carrying fuels like diesel and gasoline, as they now cover thousands of extra miles.
VLCCs Adapt to Market Changes
With their massive size and long-distance sailing capability, VLCCs offer cost advantages. Olivi noted, “VLCCs have become the bellwether of the market, they are extremely flexible in adapting,” highlighting their importance in responding to shifting market demands.
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Source: Yahoo Finance
