Freight rates on Baltic-NWE route at six month high on tight position list: sources

Aframax freight rates on the Baltic-Northwest Europe, basis 100,000 mt, hit six-month high Tuesday on a tight position list for the end-July and early-August loading dates, shipping sources said Wednesday. According to Platts data, freight rates on the Baltic-NWE route soared Worldscale 35 to w185 Tuesday, the highest assessed since January 28 when the rate on the voyage peaked at w190. Shipping sources indicated rates on the Baltic-NWE route still at w185 Wednesday after a few ships were heard on subjects at the same rate. “Based on activity today, and recent fixtures…a charterer paid w185 for injection barrels, and two others were replacements on the Baltic-UKC route, basis 100,000 mt,” a charterer said. “All transactions were within acceptable fixing window of July 7-14 prior load…I am calling rates on the Baltic-UKC route at w185,” he added. A London based shipbroker said: “More specifically the North [Baltic-UKC route] unsurprisingly remains firm for July dates. Whether this should carry into August still hangs in the balance with many waiting to see how publicly active the first five days of Urals will be.”

Surging freight rates have created additional complications in the broader Urals market.

“There has been a big jump [in freight rates] over the last couple of days,” a crude trader said. “It is just a big congestion period, and everyone is trying to fix as quickly as possible.”

FOB Primorsk Urals cargoes, in 100,000 mt Aframax-sized clips, were assessed at a $4.40/barrel discount to the Mediterranean Dated Strip on Tuesday, the largest discount since freight rates peaked in mid-June during a period of chronic weakness in the broader Urals market.

Platts assesses FOB Primorsk cargoes as a freight netback to the CIF-delivered Rotterdam Urals market, using the Baltic-UKC freight route to calculate Urals value back to its pipeline source at Primorsk on the Baltic Coast.

Sources said the sharp rise in freight costs had closed any arbitrage window into the Mediterranean, at least for the time being, despite the recent tightness in scheduled exports out of the Black Sea port of Novorossiisk. July’s Urals loading program in the Black Sea was the shortest in more than two years, according to Platts data.

“Freight rates are skyrocketing,” a crude trader said. “And that is closing the possibility of an arbitrage.”
Source: Platts