PG VLCC rates at 6-month high as crude oil offloading halt in Louisiana nears 2nd week

VLCC rates in the Persian Gulf were at six-month highs, as the suspension of crude offloading operations at a terminal in Louisiana is expected to delay discharge of cargoes and push up spot demand for the super-tankers, market sources said Tuesday.

“We definitely expect this to have a significant impact on the [VLCC] demand and supply situation,” one of the sources said.

The key Persian Gulf to Japan route was at w54 Monday, a level not seen since February 19, according to Platts assessment data.

Regular shippers of crude from the Persian Gulf to the US Gulf Coast typically comprise oil majors as well as Middle East producers such as Saudi Aramco and Kuwait Petroleum Corporation.

These charterers move most of their cargoes on vessels controlled by them on the Persian Gulf to USGC route. In the event of their ships getting held up at Louisiana Offshore Oil Port, or LOOP, they would have to turn to the spot market to charter VLCCs, sources said.

It is almost a week since LOOP’s Offshore Marine Terminal suspended its crude offloading operations to inspect and repair a pipeline, following the discovery last Wednesday of an oil sheen along one of its pipelines’ right-of-way. Operations are expected to resume between August 21 and August 23, according to LOOP’s estimates.

“The position list in the Atlantic will now be tight and will need more ships to ballast from the East,” said a Tokyo-based VLCC broker.

Anticipating the tightness in supply due to the offloading suspension at LOOP’s terminal, charterers started placing VLCCs on subjects in the Persian Gulf even before the cargo stem nominations for September were announced.

While LOOP has promised to expedite offloading when repairs are complete, market watchers said this will involve lightering in smaller ships such as Aframaxes and may boost the rates for the 80,000 mt tankers.

This will further delay the availability of ships for loading next month, market sources noted.

LOOP, has the ability to take deliveries of up to 1.2 million barrels of crude daily and said all other pipelines into and out of the Clovelly Hub remain operational.

“It is obvious that there will be a delay in the turnaround of vessels,” said another source with a VLCC owner. The existing tightness in supply will be cascaded further, the source said.

Already many ships have ballasted to West Africa and to the Carribean region from North Asia to capitalize on higher rates.

The offloading suspension in Louisiana comes at a time when VLCC rates have rallied amid a preference for loading cargoes from West Africa.

The daily earnings on a West Africa to North Asia voyage are currently around $36,700 compared with $33,800 on a Persian Gulf to North Asia voyage, brokers said.
Source: Platts