US to Europe MR tanker rates soar to 2013 high of Worldscale 130

US Gulf Coast-UK Continent freight rates, basis 38,000 mt Medium-Range tankers, Wednesday reached a 2013 high of Worldscale 130 and a seven-month high of $30.12/mt on strong export volumes out of the US.
Over the past two weeks, the spread between freight rates for the transatlantic route has kept widening, with a growing premium for the backhaul route for MR tankers over the fronthaul route.
A flurry of fresh fixtures were reported Wednesday in the US Gulf Coast area, including one MR tanker heard on subs at Worldscale 130 to load 38,000 mt of clean product around July 12 from the US Gulf Coast for a transatlantic route.
"The [USGC] market is still steaming hot and rates are ever increasing," said a US-based shipowner. "The fourth of July will dampen activity, but I think that we are going to see these levels remain stable and they may even increase next Tuesday."
Another aspect related to the latest spike in MR rates from the US to Europe has been a decrease in imports of gasoline in the US from Northwest Europe, decreasing the availability of vessels in the North American continent that do not make the Trans-Atlantic route back to the US.
"The Trans-Atlantic way is not workable," a gasoline trader said referring to the closed spot arbitrage for the typical gasoline export route from Northwest Europe to the US Atlantic Coast.
The historically more expensive UKC-USAC gasoline freight rate has been falling, while on the backhaul, or distillate exports from the US Gulf Coast to Europe, freight rates have been increasing.
The clean MR UKC-USAC route has been assessed at Worldscale 110, or $18.97/mt, for the last week, a seven-month low, Platts data showed.
The latest US Energy Information Administration data showed total gasoline inventories slid 1.719 million barrels to 223.662 million barrels over the reporting week ended June 28, with a 844,000-barrel draw along the East Coast. Imported volumes into the East Coast plunged by 508,000 b/d to 353,000 b/d.
"It would appear that [internal] deliveries have picked up more than expected ahead of the long Independence Day holiday weekend," a report by BNP Paribas said Wednesday, adding however that "US gasoline stocks are some 9% above a year ago and remain above the five-year range."
On the middle distillate side, arbitrage diesel barrels from the US have been making their way to Europe since the beginning of June amid relatively higher premiums in the Northwest and the Mediterranean and an increase in US refineries' gasoline production, which also increases diesel output.
Refinery utilization for the week ended June 19 in the Gulf Coast region was up 1.2 percentage points at 93.1%.
Europe, which as a region has adopted diesel as its main driving fluid, is net short of the product and requires imports from the US and the Baltics.
According to an industry source, approximately 1.2 million mt of diesel made its way from the US to Europe in June and according to European traders between 1 million and 1.5 million mt of diesel could also make its way to Europe in July, depending on arbitrage economics.
The increase in MR rates on the US to Europe Trans-Atlantic route has led some exports of diesel to be shipped on Long-Range 60,000 mt tankers, an unusual trend in the industry as such larger-sized vessels are often difficult to place in Northwest Europe due in part to more restrictive ports dimensions.
Source: Platts