Excess gasoil in Europe has prompted some traders to divert their cargoes back to East of Suez ports after they already reached the Mediterranean or Red Sea, market sources said Wednesday.
Some of these diverted vessels are expected to discharge in Singapore or East Africa while others may reach Rotterdam after much delay, sources said.
LR2 tanker the SKS Tagus, controlled by Mansel, the commercial shipping arm of Vitol, was floating in the Mediterranean for a few months after it had loaded from Singapore. It is now in the Red Sea and headed toward Singapore, said a chartering source with a global trading company.
Sources said the Captain Paris -- an LR2 tanker that had been taken by Vitol for end-September loading on the Persian Gulf-to-Europe route -- was until recently floating near the Straits of Gibraltar and is only now heading for Rotterdam.
"The ship is running behind schedule by more than 50 days and was waiting for orders," said a senior shipping executive tracking the developments.
Market sources confirmed the development.
"SKS Tagus loaded in Singapore around mid-August and came to the Mediterranean a few months ago," said a clean tankers broker in Singapore.
In another instance reflective of the gasoil glut in Europe, the Anatoly Kolodkin that loaded in Sikka last month for a voyage to Europe is expected to eventually discharge either in East Africa or in Singapore.
There are other cargoes that are getting diverted but "a bit difficult to provide at this time as some of it might be private," one of the sources tracking the developments said.
"Due to cheaper crude, some refineries in Europe have increased their run rates and added to the gasoil supply," said a chartering source with a global trading company. This in turn has affected the import demand for gasoil.
A warmer-than-usual winter has also slowed demand for gasoil in Europe, sources said.
LOWER FREIGHT ON WEAK DEMAND
Some of the charterers have already turned cautious and are lifting only a limited volume of gasoil from the Persian Gulf and India for moving to Europe. The number of fixtures for such voyages have come down to a trickle and also dragged down the freight rates.
The PG-UKC LR2 rates at $1.9 million are currently hovering around their lowest level for the year, according to the latest Platts data. The rates have less than halved from the 2015 high of $4.075 million reached on August 12, the data showed. There is a slight uptick in rates this week but it is mainly driven by spillover support from demand on the PG-East routes.
"There is hardly any gasoil movement from Persian Gulf to Europe, with potentially more volumes coming from the US [and] the products being on waters for a longer time," a chartering source said.
There is not much demand to take LR1s on the PG-Europe routes either. The rates have less than halved from the 2015 high of $3.15 million reached on August 5. Due to this sluggish scenario and bleak outlook for rates, LR1 owners are instead trying to garner business on the India-US Atlantic coast routes.
Late last month, at least five LR1 ships were fixed on the India-USAC routes, significantly below the last-done rates, amid a relatively tighter supply and a better outlook for earnings in the US.
