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Hurricane Harvey Boosts Long-Haul Product Trade Flows

Hurricane Harvey has wreaked havoc on global oil markets as almost a quarter of US refining capacity was shut, sending reverberations throughout Asia’s refined products as well as product tanker markets. While many USGC refineries and key pipelines are in the midst of restarting or have already resumed operations, around 3.8 mmb/d of capacity remains shut as of Tuesday according to Reuters.

Refinery outages in the USGC have led to a jump in jet fuel as well as gasoline shipments from Asia to the US and Latin America postHarvey. Charterers have been playing it safe by adding multiple discharge options including the USWC, USGC, WC Mexico and Peru. Around 865 kt of CPP from Asia has been tentatively booked to move to the US and Latin America since August 25th. In comparison, around 375 kt was fixed for August loading before Harvey while July volumes were 675 kt. While cargoes from Asia to the US typically move on MRs, some LR1s have been chartered as well. As such, MR rates in North Asia have been creeping up with rates for a South Korea/USWC voyage basis 40 kt up by $150,000 w-o-w to $1.15 million.

Rates for a South Korea/Singapore run basis 40 kt grew by $20,000 from last week to $350,000. Overall sentiment in the North remains firm as a number of outstanding enquiries remain for transpacific cargoes. It is worth noting that quite a number of ships have failed subjects and are currently continuing to do so. Some ships were released as traders rushed to fix before they had the cargoes, while some traders were unable to find a buyer as key USGC refineries resumed operations, alleviating concerns about supply shortfalls. Out of the 865 kt of CPP moving from Asia to the Americas, at least 395 kt consists of jet fuel from South Korea and Singapore to the USWC.

US West Coast jet prices last settled at $78/tonne higher than Singapore jet prices, making the arb profitable. USGC shipment delays has left LatAm buyers with no choice but to turn to Asia for gasoline imports. PMI, one of the largest buyers of USGC gasoline, has provisionally fixed at least two MRs to carry gasoline from South Korea and Singapore to West Coast Mexico.
Source: OFE Insights

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