Aframaxes in the all-important US Gulf load region leapt to W700 for voyages to Europe yesterday, up from W269 last week as buyers rushed to secure early delivery of crude oil to fill the gaping hole left by lost Mideast Gulf supply. Suezmaxes rates from USG to Asia, untested over the past few days, could well be hitting $20/21m, up from $18m last week.
Atlantic basin crude grades have traded at a significant discount to those in the Middle East since Iran blocked the Strait of Hormuz. The first wave of post-Iran fixing out of the US Gulf came from Asian buyers. Asian refiners are the most exposed to the loss of Mideast Gulf crude. Initially this buying cleared out all the prompt VLCCs - the natural vessel for the long-haul voyage to Asian markets. But the natural window for loading VLCCs fixed today is end April / early May, sailing round the Cape of Good Hope to offload roughly a month later.
Asian buyers need refinery feedstock sooner than that. But with no Aframaxes or Suezmaxes in position to fix ‘normal’ loading dates one or two weeks forward, US Gulf charterers are having to tap into vessels ballasting from Europe to load on April 15+/- . This is the furthest forward fixing, and the tightest tonnage supply, our brokers have ever seen in the region. To make matters worse, some Aframaxes already moving crude from the US Gulf to Europe are declaring Asian options, keeping them out of the market for longer. Aframaxes, and some Suezmaxes, can deliver cargo to Asia quicker than VLCCs as they can pass through the Panama Canal.
Suezmaxes were last reported fixing US Gulf to China at $18m when USG / Europe on a Suezmax was W250. US Gulf / Europe is now W350, which leads us to believe the next Suezmax fixture from US Gulf to Asia will fix north of $20m. West Africa Suezmax rates are already moving up in response. West Africa to Europe is up from W270 yesterday to W320 today. At these levels, VLCC should be capping Suezmaxes, but such is the tightness in the Atlantic that VLCC rates are starting to look undervalued in the region.
Both Aframaxes and Suezmaxes have seen exceptionally strong demand in the Gulf of Mexico since the start of this year - partly thanks to US (and more recently Indian) demand for Venezuelan cargoes, and partly thanks to CPC pipeline outages (Jan/early Feb) that left Europe hunting for alternative supplies. Furthermore, tonnage ballasting to the Gulf to move US bbls had been delayed by bad weather.
Fixing activity will slow as forward fixing days returns to normal, but there is little to indicate this will be anytime soon. Confidence in a quick resolution to the Mideast Gulf conflict is low, despite yesterday’s announcement from the Americans that they were in talks with Iran (which Iran denied). Meanwhile, April loadings in the US Gulf from mid-April onwards is being boosted by the release of US government SPR, either directly or by freeing up more WTI for export.