Weather delays, closed gasoline arb slows USGC clean tanker tonnage replenishment

Weather delays at major East Coast Mexico products ports and a challenging gasoline arbitrage on the 37,000 mt UK Continent-US Atlantic Coast route stand in the way of loading clean petroleum products on the US Gulf Coast and transporting them to the current high demand regions in South America and across the Atlantic.

A week-long fixing spree over March 30-April 8 has led freight to surge 125% on the 38,000 mt USGC-Transatlantic runs and 98% and 100% on the interregional benchmark routes to Chile and Brazil. Market participants said April 8 that Americas clean tanker rates could continue at current peak levels for a while longer.

“There are still cargoes working 15-20 windows where supply of tonnage is thin,” said a shipowner. “Maybe in a few weeks with ballasters [freight] might level out.”

The Americas clean tanker markets have witnessed a hefty fixing spree since March 31, leading to depleted tonnage and pushing freight to impeccable heights. Freight for the 38,000 mt USGC-Transatlantic runs were last assessed at w450 April 8, up w100 on the week and w185 on the peak rate during the floating storage boom, when freight was assessed at w265 April 27, 2020, according to data from S&P Global Commodity Insights.

Weather-related delays at Mexico’s eastern ports have added to concerns over tanker tonnage replenishment on the USGC, following heightened charterer inquiries to cover diesel and naphtha stems in place of self-sanctioned Russian barrels and strong diesel demand on the USGC-Caribbean and USGC-South America runs.

Mexico delays

Roughly 27 Medium Range tankers have been waiting to discharge at the East Coast Mexico ports of Tuxpan, Pajaritos, Veracruz and Tampico since April 7, as a cold front has caused some ports to close completely, market sources said.

While the port of Pajaritos is allowing already docked ships to unload product, Tuxpan is not letting any tankers operate, making seven MRs, which typically carry 38,000 mt of refined product, buoy nearby, according to market sources based in Mexico.

“Ships that have already entered the Tuxpan port prior to the close are allowed to unload, but the rest are buoyed, it’s been provoking certain delays,” said a market source based in Mexico.

Although proximity was not an issue compared with ships ballasting from longer-haul destinations, such as Brazil, Chile, or even Europe, where round trips range between 22-36 days at a speed of 13 knots, delays for tankers that usually recycle back to USGC from short-haul trips within seven to 14 days had exacerbated the current extremely tight tonnage count.

“We’ve been having a ton of demand recently, especially since we’ve lifted [pandemic] restrictions, schools are back in session, and the traffic has been seen returning to pre-pandemic levels,” said the market source.

The situation is expected to resolve by April 9, as the cold front that hit the Gulf of Mexico has already affected a day’s worth of operations, but the Americas clean tanker markets are already operating on a delicate scale.

“I think this will last not a month, but maybe a few more weeks, it’s just not sustainable for charterers,” said a shipbroker, referring to charterer’s resistance to keep freight at sky-high levels.

Tonnage reduced from Europe

A challenging gasoline arbitrage on the front-haul 37,000 mt UKC-USAC route is set to shorten available tonnage on the USGC further, decreasing the number of tankers usually ballasting to the USGC after discharging gasoline.

Northwest European gasoline exports to the USAC are expected to fall sharply in the week to April 10, as high European flat prices are causing a buildup of unsold cargoes in the Amsterdam-Rotterdam-Antwerp trading hub for prompt delivery, market sources said.

About 102,000 mt gasoline were expected to load in Northwest Europe for export to the USAC in the week started April 4, down 100,000 mt on the week, according to Kpler shipping data.
Source: Platts