11 April 17

More Room for Asian VLCC Rates to Falls Could Benefit From Rise Of US Crude Oil Exports To Asia

nagaragawa_VLCC_oil_tanker-HUGEAnother major shift is underway in the tanker market, as a new trade route is fast emerging, as US to Asia exports are rising, commanding larger ships for the inevitable economies of scale. In its latest weekly report, shipbroker Gibson said that “for crude tankers, voyages from the Caribbean to Asia via the Cape of Good Hope are generally considered the longest haul; however, the lifting of the US crude export ban made possible an even longer route from the US Gulf to Asia Pacific. The volumes traded were fairly modest in 2016: almost nothing was transported to Asia during the first half of year, while shipments rose slightly to around 60,000 b/d during the 2nd half. This was largely expected considering the decline in US crude production for most of 2016, which fell by over 0.5 million b/d year-on-year. This not only limited the scope for the increases in total US crude exports (which were up modestly by just 55,000 b/d, including those barrels to the East) but also translated into higher crude imports, which registered much stronger gains. In addition, shipping US crude to Asia is relatively high cost and there are also infrastructure limitations.

According to Gibson, “US crude is largely exported on Aframaxes and Suezmaxes, while a VLCC loading (most practical for long haul) involves an expensive reverse lightening exercise. AIS tracking data shows that just four VLCCs shipped US crude to Asia in 2016, all in the 2nd half of the year. The dynamics of the market have changed this year. US crude production has started to bounce back and is forecast to continue to grow. At the same time, massive Middle East OPEC cutbacks have limited regional crude availability, translating into higher values for the Middle Eastern barrels relative to the Atlantic Basin benchmarks. The price differential between DME Oman and WTI crude futures moved from an average discount of around $1.4/bbl in 2016 for DME Oman to a premium of around $1.5/bbl so far this year”, said the shipbroker.

These developments have stimulated total US crude exports to a number of destinations, including higher demand from Asian refiners. “Preliminary weekly US data suggests that total crude exports averaged around 0.77 million b/d so far in 2017, up massively by 350,000 b/d versus the same period last year. AIS tracking data also shows a notable increase in shipments to Asia, with 3 VLCC loadings in January, 5 loadings in February and another 5 in March. Whilst Middle East OPEC production cuts remain in place, such “restraint” is likely to support robust demand from Asian refiners for US crude”, said Gibson.

Source: Hellenicshippingnews More Room for Asian VLCC Rates to Fall Oman Shipping to acquire 10 new vessels

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