Freight on the US Gulf Coast-trans-Atlantic and Caribbean/East Coast
Mexico-Upcoast Aframax routes fell 41% and 47% week on week,
respectively, as cargo inquiries dried up amid a closed trans-Atlantic
arbitrage and oil company relets, as well as ballasters entering the
market, according to S&P Global Platts data.
Softer rates on larger ships, as well as a weaker UK Continent/Mediterranean market, contributed to the steep decline in rates.
The cost of taking an Aframax on a trans-Atlantic voyage from the
USGC fell Worldscale 80 week on week to be assessed Monday by S&P
Global Platts at w115, after Phillips 66 booked the Seaoath at that rate
for a May 10-12 loading. Bids on a BP cargo for the USGC-UK
Continent/Mediterranean route loading May 9-10 were heard lower than
w115 Tuesday.
Freight for inter-regional routes almost halved week on week,
falling w115 from w245 to w130 between April 27 and May 4. On Monday,
Phillips 66 booked the Iblea for the East Coast Mexico-USGC route at
w125, loading May 10, after Unipec placed the Ionic Artemis on subjects
at w135 for the USGC-Caribbean run, which typically holds a w5-10
premium to the upcoast routes.
Freight rates started to slide from the middle of last week as
relets entered the market, in spite of tonnage lists remaining tight
throughout the week.
"There are a lot of relets out there ... every major oil company is
showing a relet in the Gulf" of Mexico, a shipbroker said April 29.
"Mercuria was out there, fixed a relet, market dropped about 50 points.
That was the big move," a shipowner said. As many as six relets were
heard open in the market at the beginning of the week.
OPEN USGC AFRAMAXES
A drop in rates in the UK Continent/Mediterranean market prior to
April 20 sent a number of Aframaxes both ballasting and laden to the
USGC as owners hoped to make better returns in the latter market, adding
to the already ample tonnage list. A total of 50 Aframaxes are expected
to be open on the USGC between May 5 and May 24, including eight ships
open for prompt dates, while 10 Aframaxes were reported to be on their
way from Europe, both laden and ballasting.
The trans-Atlantic arbitrage for West Texas Intermediate and Eagle
Ford crude has remained closed, drying up the incentive for charterers
to inquire about such voyages. On Tuesday, the arbitrage for WTI MEH
from the USGC to Rotterdam versus North Sea Forties crude stood at minus
$5.66/b, according to S&P Global Platts Crude Arbflow. With the
recent drop in freight, the freight delta has narrowed 44% during the
past five days from $5.12/b on April 30 to $2.88/b Tuesday.
Looking forward, a pick-up in activity Monday and Tuesday suggests
the current advantageous rates are drawing out charterer inquiry.
"I don't believe this market is going to stay this low for long. [I]
wouldn't be surprised if rates picked up by the end of this week," a
shipowner said.
Sources suggested freight for the trans-Atlantic route will bottom out at the w90-w100 level.
"All year we have seen resistance on Aframaxes a few ticks above
w100, [but] it will depend on what happens with these [crude] output
cuts," a broker said.
