Chartering Demand Surge for MRs in USG

A chartering  demand  surge  has been recorded this  week  in the United States Gulf (USG) medium range (MR) tanker market  with  total observed fixtures concluding at a record high.  The activity strength follows  several  weeks  of  stronger  activity  throughout  the  Atlantic  basin  and  an  earlier  surge  in  ex‐UKC  rates  which  saw  that  region  firmly  attract  USAC  positions  which  would  otherwise  have  ballasted  to  the  USG  market, according to Weber Weekly Tanker report. As a result,  regional  supply/demand  positioning  tightened  significantly  and  led  to  strong  rate  gains with the USG‐UKC route observing a record high. The route’s present  assessment of ws170 exceeds the previous high fixture recorded on 31 July 2008  at  ws255  which  equates  to  ws167.85  on  the  2014  nominal  (flat)  Worldscale rate schedule, the report reads. The  USG  activity  gains  come  on  the  back  of  a  buildup  of  PADD3  distillate inventories  to  a  four  month  high  and  as  regional  refinery  crude  inputs continued  to  rise. USG  product  prices  have  remained  attractive  allowing  for stronger exports accordingly. Of this week’s 54 regional fixtures, 7 were bound for points in Europe (40% more than the YTD weekly average) while 29 were bound for points in Latin America and the Caribbean (a record high) and 18 were bound for other areas (also a record high, the report added. In granular focus,  fixtures  for  voyages  to  Venezuela  rose  more  aggressively  this  week  due to prolonging of refinery outages which materialize there last month. The USG‐UKC route added 40 points over the course of the week to ws170  while the USG‐POZOS route gained USD 125k to USD 875k. Rates remain firm at the  close  of  the  week  and  could  be  poised  to  observe  further  gains  early during  the  upcoming  week,  though  the  extent  thereof  are  likely  to  be limited,  particularly  for  voyages  within  the  Americas  while  the  USG‐UKC route  could  continue  to  observe  upside  to  compensate  for  ex‐UKC downside  to  hold  triangulated  TCEs  largely  stable. Further forward, as written by Weber, as units freeing on the USAC are now ballasting to the relatively more active USG market (in lieu of ballasting to Europe), the presence of these units should ultimately place a ceiling on rates and eventually allow for a correction. Already,  two‐week  forward  USG  positions  posted  a  50%  w/w gain  in  light  of  the  USAC  positions  to  57  units.    Moreover,  with  the  EIA  reporting  a  6.1%  year‐on‐year  rise  in  weekly  gasoline  demand  last  week (during  the  US’  Thanksgiving  holiday),  it  could  be  assumed  that  markedly  cheaper  gasoline  prices  are  helping  to  elevate  domestic  gasoline  demand  and  thus  supporting  MR  voyage  from  Europe  to  the  USAC, the report further reads. According to Weber, this  would  possibly  help  to  limit  ex‐UKC  rate  downside  but  push  more  units  to  the  USAC which eventually will weigh on USG positions. Source: Weber Weekly Tanker Report