Gulf Coast Ship Rate Nears 4-Week High as Exports Surge

Charter rates for tankers from the U.S. Gulf Coast to Europe surged to the highest level in almost four weeks as a boost in exports from the Gulf Coast reduced the number of available tankers.
Rates for Medium-Range tankers on the Gulf Coast-to-northwest Europe route jumped 16 percent from last week to 96 Worldscale points yesterday, the highest level since Aug. 2, according to data compiled by Bloomberg. The points are a percentage of a flat rate for a particular route, which is revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
The number of tankers chartered from the Gulf Coast rose to 25 last week from 22 a week earlier, according to shipbroker Charles R. Weber Co. Exports from the U.S. refining hub are climbing as Gulf refiners process the most fuel for this time of year in at least two decades while plants in Europe reduce production.
“Rates are up because there are less ships available,” said Tom Finlon, director of Energy Analytics Group Ltd., who is based in Jupiter, Florida. “Low refinery rates in Europe have enabled more refined product exports from the U.S. and allowed the Gulf Coast to avoid big accumulations in inventory, which helps maintain prices.”
Ultra-low-sulfur diesel on the Gulf held steady at 2.75 cents below New York Mercantile Exchange ULSD futures yesterday, while conventional, 85-octane gasoline was unchanged an 11.5-cent discount to futures.
European Refiners
European refinery runs in the third quarter of 2013 are expected to be 400,000 barrels a day below a year earlier, while a growing market for refined product exports to Latin America helped sustain high U.S. refinery runs this summer, the International Energy Agency said in an Aug. 9 report.
U.S. distillate exports, including diesel and heating oil, increased 18 percent to a record 1.29 million barrels a day in June from a year earlier, the Energy Information Administration said yesterday.
Gulf Coast refiners processed 8.27 million barrels a day of crude and other feedstocks in the week ended Aug. 23, the highest seasonal level in EIA data back to 1992.
“Utilization rates in the U.S. are very high and European runs are disproportionately lower, which accommodates a significant flow to Europe,” Finlon said in a phone interview. “There’s a very consistent volume going to Latin America.”
Gulf Coast processing may fall in the coming weeks as the nation’s largest refinery undergoes unplanned work, limiting exports, said Amrita Sen, chief oil market strategist at Energy Aspects Ltd.
Motiva Outage
Motiva Enterprises LLC’s 600,000-barrel-a-day Port Arthur, Texas, refinery is performing repairs on a hydrocracker that caught fire Aug. 17 and expects to restart it, along with the plant’s largest crude unit, in a week or so, a person familiar with the work said yesterday.
“With the Motiva outage, you’re going to see the softening of product exports of from the U.S. Gulf Coast,” Sen said in a phone interview yesterday. “We should also see prices rise in the coming week because of the outage.”
Stockpiles of gasoline on the U.S. Gulf Coast, referred to as PADD 3, climbed to 76.6 million barrels in the week ended Aug. 23, while distillate inventories dropped to 41.6 million barrels, the lowest level since July 26, EIA data show.
Source: Bloomberg